FLSA Overtime Rules - Coming Sooner Than Expected

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Nonprofit employers, be aware:  the new overtime rules developed by the Department of Labor (DOL) may be finalized very soon.  To the consternation of many employers, the proposed regulatory changes significantly increase the minimum annual salary required for an individual to be considered an “exempt employee” (i.e., not eligible for overtime) from the current $22,660 to more than double that amount at $50,440 per year.  Employers will thus need to consider making any necessary changes much sooner than originally anticipated, potentially early this summer.

As we reported last November, the DOL had stated that the new salary requirement and other related rule changes would likely not be finalized until at least late 2016.  (For background information on the proposed changes and related considerations for nonprofit employers, please see our blog from August 2015.)  The extended time frame allowed time for the DOL to sort through the staggering 270,000 public comments, many filed by concerned nonprofits that depend on dedicated employees who are willing to work long hours.  Unfortunately for these nonprofits, the DOL has abandoned this expected timeline.   

On March 14, 2016, the DOL submitted its final rule to the White House Office of Management and Budget (OMB).  The OMB has up to 90 days to review the rule, and may approve the final rule sooner, at which time the new regulations are published in the Federal Register.  The rule would not go into effect immediately, as employers are entitled to at least 60 days to comply with the new regulations.  If the OMB takes only 30 days to review the rules, they could become effective in mid-June at the earliest.

Why did the DOL move up its submission to the OMB?  Given that we are in the midst of an election year, the stepped-up timeline was likely for political reasons. The new regulations are subject to the Congressional Review Act, which allows Congress to “disapprove” of major regulations during the 60-day period after they are published.  Congress’ disapproval, however, may be vetoed by the President, and then a two-thirds vote would be required to overturn the veto. Disapproval under the current President and Congress is therefore very unlikely.

Considering President Obama will be in office until January 20, 2017, the DOL’s timeline was likely modified due to a special provision in the Congressional Review Act.  If major new regulations are not submitted to Congress with at least 60 days left in its current session, the next Congress has another 60-day period for review and disapproval, which would not occur until a new President is in office.  This would leave the fate of the new regulations up to the new Congress and new President to decide.

To ensure the approval of the proposed rule, the rules must be published by May 16, 2016, so that they may be acted on while President Obama is still in office.  The OMB is expected to approve the rules slightly before that deadline.  With a 60-day period to comply, employers are likely looking at a compliance date in early July.

Until the final rule is published, some of the requirements are uncertain, but it is likely that the final rule is very similar to the proposed rules.  Accordingly, employers should proceed with evaluating whether and how they should make any changes, such as increased salaries, changes to time-keeping methods, and work allocation modifications (particularly to avoid overtime worked).  (See our August and November 2015 blogs for more information.)