Labor Laws and Overtime Deja Vu


The DOL plans to propose new overtime regulations — haven’t we been here before?


It’s easy to feel confused by the news surrounding the Department of Labor’s (DOL) recent activities, or at least, you might have noticed the DOL pop up in the news more often. So often, you might be experiencing deja vu.

Last month, the DOL announced they’ll propose new plans for overtime regulations at the start of 2019. The original proposal, which was set to take effect in October 2018, would have bumped the salary threshold for overtime eligibility up to $47,476 per year. In response, many businesses prepared for that threshold increase by adjusting employee salaries, only to hear the proposal wouldn’t take effect after all.

For a little context, last month, we asked experts Celine McNicholas from the Economic Policy Institute and Ivo Becica from Obermayer to talk about Fair Labor Standards Act (FLSA) regulations and the overtime changes that fell through.

“When the Obama administration issued a rule that would have updated the salary threshold for overtime eligibility, they were challenged in court in the Eastern District of Texas,” said McNicholas. “While the legal merits of the rule were evaluated, last year, the court decided the Department of Labor had exceeded its authority in issuing the rule. So the rule was struck down. The Department of Labor appealed, but chose in that appeal not to defend the rule itself — the salary threshold — but rather the Department’s right to issue a rule on this matter.”

With the latest announcement in mind, you might take DOL news with a grain of salt. But be warned: Keeping up with proposed changes is still vital for FLSA compliance and avoiding an expensive labor dispute.

When it comes to predicting what will become of the salary threshold, it’s really anybody’s guess. McNicholas said, although things are uncertain, the threshold isn’t likely to go above the original Obama-era proposal.

“Where things stand right now, the department’s made pretty clear they want the authority, they want the court to bless their authority to issue a new rule, but that rule will most likely be at a lower salary threshold, which will give fewer workers overtime protections,” she said.

In addition, a lower salary threshold ruling would also mean business owners who rush to comply this year might have higher payroll costs than are eventually necessary.

The DOL announcement also included the department’s intention to make amendments to how you calculate an employee’s regular rate of pay. Rate of pay rules currently figure in an employee’s hourly rate with expected bonuses, deductions, and other payments that are then multiplied by 1.5 to reach the amount an employee must be paid for working overtime.

For his part, Becica said it’s important for employers to correctly classify their employees to ensure compliance.

“As the employer, you’ve got to satisfy all three [tests] to not pay overtime. One is the fact that they are paid salary, two is that they meet the exemption number, which is what we’ve been talking about, and three is the duties test, which is typically executive, administrative, or professional,” said Becica.


In other news…

Expect to see more stories related to labor law violations. It’s been a big year already, with six months to go until the announced DOL proposals take effect. Late May also marked the Supreme Court judgment that impairs workers in the private sector from entering into class-action lawsuits over labor law violations by allowing employers to mandate arbitration.

When it comes to labor laws, our advice, as always, is to track, track, track. And make sure you have a great employment attorney who can keep your business in the loop, even if it seems like an endless one.