Department of Labor’s Overtime Rules

Adoption of regulations finalized during the Obama Administration would have meant significant cost increases for employers – including colleges and universities. However, with the U.S. District Court in Texas striking down the rule on August 31, 2017, it is now dead, and the Department of Labor under the Trump Administration is beginning the process anew.      

About

The Wage and Hour Division of the Department of Labor (DOL) proposed changes to the Fair Labor Standards Act (FLSA) in July 2015, after President Obama called for an expansion of the number of workers who qualify for overtime pay. The rule would have more than doubled the salary threshold (last adjusted in 2004) from the current level of $23,660 to $47,476.  The final rule was announced on May 18, 2016, with a deadline for compliance of December 1, 2016.  However, the rule is now dead, having been struck down by a U.S. District Court in Texas.

The DOL under the Trump Administration has taken the first step in a new rulemaking process by asking for public comment on the overtime threshold.  The request for information asks for specific recommendations on salary levels, duties test, and other methodologies.  The comments received by DOL will most likely lead to a new rule being issued in the months ahead.
 

Overtime Rules and Higher Education

The FLSA generally requires that employers pay employees overtime, based on a formula, for work in excess of 40 hours per week. The FLSA exempts certain employees from the overtime pay requirements if they earn above a certain baseline salary and meet a job duties test. Most of the exemptions apply to employees who work in the executive, administrative, or professional fields (known as “white collar” exemptions). 

Lawsuits filed by 21 states, as well as business groups, led to the nationwide injunction issued by the U.S. District Court in Texas, and the eventual decision to strike down the rule.  The judge agreed that the rule would have led to increased costs for businesses, layoffs - rather than salary increases, and was simply too high.  
 

Compensatory "Comp" Time and Higher Education

For over three decades, public employers – including public colleges and universities - have had the option of offering comp time arrangements to their employees.  Employees may decide between comp time or overtime pay, under certain guidelines.  Unfortunately, private employers – including private colleges and universities – are not able to offer employees the same option.  Having the ability to offer comp time would have lessened the blow of the Obama overtime pay rule had it been implemented.

The House has passed legislation three different times, most recently in 2013, to allow private employers to offer comp time arrangements to employees.  Unfortunately, these bills were not taken up in the Senate.  Most recently, Rep. Martha Roby (R-AL) authored the "Working Families Flexibility Act," which passed in the House and awaits consideration in the Senate.

The DOL cannot allow private employers to offer comp time arrangements until both chambers of Congress pass legislation that is signed into law by the President. 
 

Outlook

The DOL has started the rulemaking process from scratch.  Once it has processed the comments, the Department will likely issue a new proposed rule on the overtime threshold.  Then, there will be an additional comment period as well as public hearings.  While the entire process can take many months, it’s likely the next proposed salary threshold will have a gradual, less severe adjustment to the overtime pay rate that employers have indicated they could live with.

What You Can Do

 

Resources  

NAICU Contact

Karin Johns: Karin@NAICU.edu

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