DOL's Final Overtime Rule Expected Soon

The Latest on Content and Timing

Last Updated May 17, 2016 

Any day now, the Department of Labor is expected to issue its final overtime pay rule. Designed to increase the number of workers who are eligible to receive overtime pay by raising the annual white collar exemption threshold, the rule will have significant implications for LSA members and nonprofits across the country. Below, please find the latest news on the content and timing of the final rule, as well as what you can expect from LSA in the coming weeks. 

***UPDATE! May 17, 2016 - According to media reports, the Labor Department will release its final overtime pay rule tomorrow, May 18. The rule is said to increase the white collar exemption threshold to approximately $47,500 (to be updated every three years), make no changes to the duties test, and have an effective date of December 1, 2016.***

What Will the Final Rule Say?

We don't know yet. The content of the final rule will not be known until DOL releases it to the public, by publishing it in the Federal Register.  Currently, the rule is under review at the White House’s Office of Management and Budget (OMB), a final step in the lengthy federal regulatory process.  OMB has been meeting with stakeholders – including LSA - since it received the rule in March.  However, OMB is not allowed to not reveal the contents of the final rule during its meetings. Therefore, although we have heard media reports that the final threshold may be lowered slightly – from $50,440 to $47,000 or $47,500 – and adjusted every three years, this information cannot be verified and should not impact LSA member compliance plans.

Similarly, we do not have any confirmed information about potential changes to the salary or duties test.  However, Tammy McCutchen - a former administrator of DOL's Wage and Hour Division and current Principal at Littler Mendelson - is predicting that the final rule: (1) will provide for annual increases based on inflation; (2) will not allow employers to count bonuses towards the minimum salary level; and (3) may make changes to the duties test to limit the amount of time exempt employees may perform non-exempt work.  

Meanwhile, Politico is reporting that although DOL considered changing the duties test, the Department ultimately decided to leave the test as-is in the final rule.

When Will the Final Rule be Released? 

Soon! Due to the impact of a seldom-used, but potentially significant law known as the Congressional Review Act, it is widely believed the Department wishes to publish the final rule by mid-May, 2016.  But first, OMB must complete its review process, which typically takes between 30 and 90 days.  In the spring of 2015, OMB reviewed DOL's proposed overtime rule in 55 days.  As of today (May 13) the final rule has been at OMB for just over 60 days.  It is not likely the final rule will be published while OMB is still conducting stakeholder meetings, which we know were scheduled through May 12. However, it is entirely possible the final rule will be published within days of OMB wrapping up those meetings.  

On May 16, media outlets began reporting that the Administration plans to unveil the final rule on Wednesday, May 18 at an event in Columbus, Ohio featuring Vice President Biden, Labor Secretary Tom Perez, and Sen. Sherrod Brown (D-OH).  Read more from Politico.

How Long Will Employers Have to Comply? 

At least two months. By law, DOL need only provide employers with 60 days to comply with the new regulations. This clock starts ticking once the final rule is published in the Federal Register.  However, it is within the Department's authority to extend the effective date beyond the minimum 60 day period. LSA and other stakeholder groups have raised concerns about this potentially short timeline in meetings and communications with Administration officials. Though we have requested a delayed effective date and phased-in implementation period, we won’t know if these recommendations have been incorporated into the final rule until it is released. In 2004 - the last time the overtime rules were updated - the Department gave employers 120 days to implement what was a far more modest salary increase.  We are hopeful DOL will provide at least the same here, and recent media reports have suggested the final rule may have an effective date of December 1, 2016.

What Should I be Doing Now to Prepare?

Whatever the implementation timeline, compliance will require prompt and focused action. Employers would be wise to identify now, if they have not already done so, the positions that may be subject to the salary threshold increase. Such a review should consider how operations – and workers - would be impacted by reclassification to non-exempt status and/or salary increases. Employers may also wish to determine how much lead time their payroll and timekeeping vendors will need to implement any changes, and assess whether training regarding timekeeping practices and general management of newly reclassified non-exempt employees is needed. See LSA’s Compliance Planning Checklist for more information.

What Can I Expect from LSA in the Coming Weeks?

LSA will keep you up-to-date on the latest developments through a number of resources.  When the new rules are released, we will issue another Advocacy Alert.  This Alert will be sent to you by email and via updates to our social media outlets. Additional analysis will be sent during the weeks after its release, and we will make all of this information available on our DOL Resource page

Anticipating the announcement of the new regulations, we have been working with Independent Sector on a digital learning series about how to comply with federal overtime rules.  The first webinar, “Is Your Organization In Compliance with the Fair Labor Standards Act”, will take place on Tuesday, May 24, from 1:00 – 2:00 PM Eastern.  During the webinar, officials from the Department of Labor will lead an exclusive training session for the nonprofit community that will clarify current overtime rules, help you determine which employees they may affect, and provide you with information for determining if your organization is in compliance.  Learn more and register here.  

Of course, if you have any questions, concerns, or suggestions for future LSA resources, please contact LSA’s Director of Public Policy and Advocacy, Lindsey Copeland, at lcopeland@lutheranservcies.org.