Clear the dust bunnies. The current overtime rules have been in place for what seems like forever. Applying these rules to eligible employees is second nature to many payroll administrators. Times though … they are a changing. Last year, the Department of Labor announced a proposed rule extending overtime protections to nearly 5 million white collar workers.
The Department of Labor’s agenda, which increases the salary threshold for white collar exemptions from $23,660 to over $50,000 per year, indicates that the final overtime regulations will be released in July. However, recent changes indicate that they may actually be published months earlier. Employers need to start preparing now for the changes, especially if the release is expedited.
Why Could the Regulations Be Finalized Sooner than Expected?
- The biggest indication is that the Department of Labor sent the proposed finalized overtime rules to the Office of Management and Budget on March 15, 2016. This is the final step before the rules can be published. The review process for the Office of Management and Budget is usually around two months, but there has been speculation that this review will be expedited, so that it could be published as early as April or May.
- Another factor that may have influenced the expedited process is the political environment in Washington, D.C. and that this is an election year. Congress is given 60 legislative days to review any final rule issued by a federal agency, in accordance with the Congressional Review Act. Congress may choose to pass a resolution to nullify the rule if they disapprove of the regulation, which is likely to occur with the Republican majority in Congress. However, the President has the power to veto the resolution. Then, Congress has the option to override the veto by a two-thirds vote.
- There is also an unusual provision in the Congressional Review Act that states that any new rule that is not submitted to Congress within 60 session days following the suspension of the Senate or House, may then be subject to a renewed review by the new Congress in the next Congressional session. This also carries with it a possible veto by a newly elected President. Or, the new President may choose to kill the rule by letting a resolution of disapproval stand if Congress’s 60-day-review period goes beyond the presidential inauguration. It is anticipated that the President will do anything possible to expedite the overtime rule to Congress preceding to the cutoff period. The current administration will want to prevent any chance that a new President and/or Congress would have the ability to review the overtime rule in 2017.
So, What Now?
Now that employers are facing a compressed timeline for the overtime rules to go into effect, it is best that they decide now how they will approach employees who will no longer qualify as exempt under the new rule. Some employers will select to change the status of a handful employees to non-exempt and track employee’s time to pay them overtime. Other employers may find that it may cost less to increase exempt employee salaries to meet the new threshold. Regardless, employers need to start preparing now to ensure that they are not caught off guard and slapped with a wage claim when the final ruling goes into effect.