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The U.S. Department of Labor on Thursday issued its long-awaited overtime proposal, suggesting employers must pay overtime to workers who earn less than $679 a week, or $35,308 per year.
This is an increase from the $455 threshold, or $23,660 a year, under the current standard, which was set in 2004, but less than the $913 a week, or $47,476 annual salary, that had been proposed by the Obama administration.
In addition, unlike the Obama Administration proposal, which called for updating the threshold every three years, the Trump administration proposal, which would take effect on Jan. 2, 2020, will not include an automatic adjustment mechanism.
Instead, the Department of Labor is asking the public to comment on a periodic review to update the salary threshold, according to the statement issued by the agency Thursday.
Ken Sonderling, acting administrator for the department’s age and hour division, said in the statement that commenters “overwhelmingly agreed that the 2004 levels need to be updated.”
The public is being asked to submit comments on the proposal to the DOL over the next 60 days.
Alexander J. Passantino, a partner with Seyfarth Shaw LLP in Washington, D.C., said the Trump Administration proposal was expected in terms of the proposed threshold. It is “ridiculously close to the exact middle” between the current $23,660 threshold and the $47,476 threshold
The DOL is saying, “We’re going to go up, because it’s time to go up, but we’re not going to go up as far as the Obama Administration did.”
Marty Heller, of counsel with Fisher & Phillips LLP in Atlanta, said he believes the final rule “will be something remarkably similar to what’s in the proposed rule,” although there could be some “minor tweaks.”
“Certainly, employees are going to desire” the overtime rule to be closer to that proposed by the Obama administration. The proposal is “an effort to increase it while still thinking it’s likely to pass any injunction attempts by employee groups,” he said.
The proposal “is a much easier pill to swallow” for employers than the Obama administration’s, said Robert A. Boonin, a member of law firm Dykema Gossett PLLC in Detroit.
“I don’t necessarily think it’s a slam dunk,” he added, however. “There may be those who may challenge it” but those who do so “should be careful what they ask for” because that could “spur some congressional action if it gets too dramatic.”
Mr. Boonin said also, “A lot of businesses already made their adjustments back in 2016, before the injunction, and so many businesses are already in a compliance mode, or else close to it, and others will just need to evaluate what they were likely about to do two years ago.”
The overtime issue has a complex history. The Obama administration’s proposed rule had been set to be implemented on Dec. 1, 2016. But on Nov. 22, 2016, Judge Amos L. Mazzant III of U.S. District Court in Sherman, Texas, issued a preliminary injunction halting it.
The ruling was appealed the 5th U.S. Circuit Court of Appeals in New Orleans but was rendered moot when
on Judge Mazzant struck down the rule on Aug. 31, 2017, holding overtime should be determined based on duties rather than salary.
At the same time, he ruled against the Austin-based Texas AFL-CIO, which had filed a motion to intervene in the case as a defendant, stating in his ruling that the union “seeks to assert defenses” already raised by the Department of Labor.
In June 2017, the U.S. Department of Labor once again began soliciting comments on a proposed overtime rule.
In October 2017, the Department of Labor appealed Judge Mazzant’s Aug. 31 ruling.
Then on Nov. 6, 2017, the 5th Circuit granted the government’s motion to hold that appeal in abeyance while the department undertook further rule-making on the issue.
The department said in Thursday’s statement it received “extensive public input from six in-person listening sessions,” and more than 200,000 comments, which led to the proposal issued.
A brief filed by the U.S. Department of Labor with a federal appeals court over the issue of overtime-exempt employees adds further complexity to an already complicated scenario, experts say.