U.S. Department of Labor’s Final Overtime Rule Not Expected in 2nd Half of 2016

Earlier this year, the U.S. Department of Labor (DOL) announced a series of proposed changes to its federal regulations regarding worker classification.  If implemented, the highly controversial rule would require U.S. employers to potentially re-classify over 5 million workers as “non-exempt”—greatly expanding the number of U.S. employees eligible for overtime compensation.  The DOL received over 250,000 public comments on the proposed changes throughout its open comment period, which ended on September 4, 2015.

Since that time, employers have had three common questions: (1) when would the DOL release its final decision on the proposed changes; (2) what will the final changes (if any) entail; and (3) when will employers have to comply with any final changes.  Recent (yet conflicting) guidance from President Obama’s Administration indicates that the final ruling will not be issued before July 2016, and likely later into the year.

On November 20, 2015, the U.S. Office of Management and Budget (OMB) published its Fall 2015 Unified Agenda and Regulatory Plan

The important thing to know about these dates [in the Unified Agenda] is that they are estimates and rarely accurate.  The agency has no legal obligation to meet that published deadline.  Some rules have been on the regulatory agenda for years and they just change the date with the new agenda comes out.”

Prior to the publication of the Fall Unified Agenda, officials with the DOL, including Solicitor of Labor Patricia Smith, indicated that the final rule would likely be issued sometime in “late 2016.”  DOL officials also stated that any changes would be issued early enough to for the changes to take effect before the President Obama leaves office.

Under either scenario, employers should not have to comply with any of the proposed changes to the FLSA’s overtime exemptions during the 1^st half of 2016.  However, the “late 2016” predictions are important for employers if true, as it suggests that the time between publication of the final rule and its effective date will be short, because the later the final rule is published, the smaller the window of time the department can allow employers to review and adapt before the new regulations become effective.  In fact, it is very likely that employers may only have 30 to 60 days after the final changes are published before they become legally effective.