DOL Releases Proposed Overtime Rule 2.0

March 08 - Posted at 3:26 PM Tagged: , , , ,

We have awaited to see where the U.S. Department of Labor would land with its much anticipated revised “overtime rule” and late yesterday the agency delivered. The USDOL released its long-awaited proposed rule which, if adopted, would set the minimum salary threshold at $679 per week, or $35,308 per year. For now, the proposed rule does not include an automatic update provision (which many were concerned would simply serve to periodically inflate the threshold level), nor does it revise the duties test that accompanies the rule.

Once published in the Federal Register, the public will have 60 days to submit comments regarding, among other things, the proposed minimum salary threshold. 

Proposed Rule In A Nutshell

  • The proposed minimum salary threshold would be raised from $455 to $679 per week ($35,308 per year, annualized).
  • The proposed rule provides for one threshold regardless of exemption, industry, or locality, subject to a few exceptions that already exist.
  • The additional total annual compensation requirement for the highly compensated employee exemption has a proposed entry level of $147,414 per year.
  • No changes were proposed to the duties tests for the exemptions.
  • No “automatic” updates were proposed.
  • The unnecessary 90/10 approach with respect to certain non-discretionary pay has been teed up again.


Will This Proposal Be The End Of The Story?

It depends. The new proposal skirts some of the more problematic areas. The $679 per week threshold is in the ballpark of what everyone has been expecting—and sounds a lot better to employers than $913. And while the proposal contains some of the same flaws as Overtime Rule 1.0, they generally are not the same kinds of concerns raised in lawsuits attacking the first proposal (at least with respect to private employers). Several legal analysts have stated they expect litigation based on the lower figure still, but the basis for such anticipated litigation is unclear given that (1) the salary alone does not make someone exempt and (2) if a salary-basis requirement exists, it should be low enough (possibly lower) to prevent its overshadowing the duties tests.

Keeping Things In Perspective: This Is A Notice Of Proposed Rulemaking

If we’ve learned anything from the saga that accompanied the release and subsequent controversy over Overtime Rule 1.0, it’s that this is a process. Many twists and turns might occur before this proposed rule is finalized. Do not run out tomorrow and make changes to your compensation structure based on what is simply a proposal. Instead, use this time to start evaluating what 2020 might look like for your compensation system if the USDOL’s proposal comes to fruition in its current form.

Some employers conservatively made changes in 2016 in anticipation of the $913 per week threshold. If you fall in this camp, you are certainly ahead of the curve—especially because the final rule could set a minimum threshold higher than $679 per week. Many other employers still have a leg up in that they undertook detailed analyses of their exempt-classified employees in 2016. If you did so, not only can you just tweak their review strategy, in many cases you will simply be confirming your prior findings when adopting the finalized changes.

Assume The Final Rule Will Come Sooner Rather Than Later

 Overtime Rule 1.0 was a painfully long process for employers as they waited to see whether the final rule would be significantly different from the proposal in some way. Thankfully, there appears to be no hint of duties-changes being on the table with Overtime Rule 2.0. Moreover, although the USDOL will likely analyze the salary threshold on a more frequent basis going forward, we do not expect some form of the troublesome automatic “updates” to pop up in the final rule.

These distinctions should narrow the scope of the comments submitted by the general public, which should make the review period easier than previous efforts. Moreover, the USDOL should not need as much time to review the comments because they should be fairly similar to those filed in 2015, 2017, and shared in 2018. 

The Bottom Line

While the proposed changes are just about what most have expected, thankfully the USDOL has had the sense to recognize that one threshold is sufficient to address its goals. The movement away from the improper “automatic” updates approach in Overtime Rule 2.0 is a welcome development.  Nonetheless, employers in certain localities or industries might contemplate submitting comments regarding the proposal.


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