New Overtime Rules go to OMB

In a relatively surprising move based on comments made late last year, the Department of Labor (DoL) sent their new rules for overtime exemption to the Office of Management and Budget for review. This is one of the last moves prior to becoming a final rule. It was expected that the new rule wouldn’t be dropped until late in 2016 and effective sometime in 2017. This move indicates that the new rule will be effective much sooner.

Many gins use one of a handful of exemptions for office and management to keep from paying those higher paid employees huge overtime rates during the very long hours of the ginning season. The current rules can be found on this fact sheet here. Most gins use the Executive Management, Highly Compensated, or Administrative exemptions or a combination for various employees. A few gins have had their office staff reclassified and had to pay overtime for those employees following an audit but most are able to properly claim those exemptions. Please read the above fact sheet to make sure you are properly paying your key employees and office staff.

A lot of people mistakenly assume salaried means exempt from overtime. For many employees working a regular schedule it is very possible to pay them on a salaried basis but they are still not exempt from overtime but that is a whole other blog post.

The new rules that DoL has proposed (final rule hasn’t been published yet) would significantly impact the threshold as to whether the executive, highly compensated, and administrative employees will qualify for the overtime exemption. For example, the highly compensated employee threshold raises from $100,000 to $122,148. The minimum for the Executive and Administrative employees increases from $455 per week ($23,600 annually) to $970 per week or $50,440 annually. These will impact a large number of our members who are currently using these exemptions in their operations.

The proposal will change these numbers (usually up) based on consumer price index and/or percentages of certain workers surveyed each year. Discretionary Bonuses are not currently in the proposal meaning you cannot count those toward the weekly or annual threshold but those purely discretionary bonuses are not subject to overtime either. The proposal doesn’t change any of the other duties tests so if you or your employees qualified before, they would likely qualify again if they met minimum compensation threshold.

Congress has, just last week, introduced legislation blocking this proposed rule from taking effect but it has not passed and its doubtful the President would sign it and unlikely there would be enough votes to override so we await the final rule’s publication.

As I mentioned near the beginning of the article, the move to send this to OMB was a bit surprising. There is widespread speculation this is a tactic to avoid the Congressional Review Act which gives Congress the ability to pass a resolution of disapproval of significant rules which would nullify the rule within 60 days of its publication. This is not normally an issue because the President would likely veto such a resolution. If the review period would extend beyond the inauguration day of a new President and the new President is of another party, he may let the resolution stand. DoL would not like this.

This rule may have major changes from what is described above when it is published (likely this Summer if not before) so please watch for news on this important rule.