By: Chris Fontan
Last week, the Trump Administration published its Fall 2018 Unified Agenda of Regulatory and Deregulatory Actions. In it, the Trump Administration formally announced the U.S. Department of Labor’s (“DOL”) intention to issue a Notice of Proposed Rulemaking (NPRM) in March 2019 “to determine the appropriate salary level for exemption of executive, administrative and professional employees.” In its Spring 2018 Regulatory Agenda, the Administration had previously targeted January 2019 for the release of the NPRM.
Many will recall the rapid flurry of activity that accompanied the DOL’s previous attempt to overhaul the overtime exemptions to the Fair Labor Standards Act. In May 2016 , the Obama-era DOL “finalized” a change to the overtime rule that would have doubled the minimum salary level for the so-called “white collar” exemption from $23,660 to nearly $48,000 per year. The proposed Final Rule never took effect. Between May 2016 and November 2016, over 20 states and 50 business groups filed separate lawsuits seeking to block enforcement of the Rule.
Then, in November 2016, a federal judge in Texas entered a nationwide preliminary injunction blocking implementation of the highly controversial Rule—less than 10 days before the Rule was slated to take effect. President Trump took office in January 2017, and the “new” DOL pushed the pause button on revisions to the overtime Rule. In August 2017, U.S. District Judge Amos Mazzant of the Eastern District of Texas officially invalidated the proposed Final Rule, thus temporarily halting the government’s highly-controversial attempt to expand overtime eligibility for millions for public and private sector employees.
Since that time, Labor Secretary Alexander Acosta, who assumed the post in late April 2017, repeatedly indicated that he favored some increase of the minimum salary threshold for exemption. In July 2017, the DOL began seeking public comment on a freshly revised overtime rule, publishing a Request for Information in the Federal Register. The comment period closed in September 2017.
So, it appears that the Trump Administration is finally ready to unveil its proposal to revise a rule that was last modified in 2004 (and before that, in 1975). So what should employers expect in a new overtime rule?
- Likely an increase in the minimum salary for exemption – but not nearly as drastic as the 2016 proposed Rule. Most commentators expect the increase to be something in the low-to-mid $30,000s. This would be consistent with Secretary Acosta’s comments on the issue, but still considerably lower than the increase proposed by the Obama Administration. Notably, the Society for Human Resource Management (SHRM) officially endorsed modestly raising the threshold to $32,000. Such an increase would still be lower—in some cases, significantly lower—than the current state law minimum salaries for exemption, such as New York (where the state minimum for exempt executive and administrative employees is set to climb to $58,500 at the end of 2018).
- Modernization of examples within the Rule for application to the current workplace. With its most recent revision in 2004, the DOL included a number of new examples to assist employers in applying the tests. It would make sense to revisit those examples, and to consider additional examples, given how the workplace has evolved in the last 15 years.
Many commentators feel that the new proposed rule—whatever it may be—is not likely to take effect until early 2020. In all likelihood, the Trump Administration’s DOL will give employers plenty of lead time to plan and prepare for any increases in the minimum salary for exemption. Regardless, employers need to be mindful of the potential changes and ready to implement them when the time comes, as 2019 looks to be an eventful year.