Final Overtime Rules Released

Employers have waited with bated breath for months for the Department of Labor (DOL) to unveil the final version of its new, unprecedented overtime rules. The wait is over.


In a Wednesday press conference in Columbus, Ohio, Vice President Joe Biden and Labor Secretary Thomas Perez unveiled the historic changes to how overtime eligibility is determined under the Fair Labor Standards Act (FLSA). The new rules are the first update to U.S. overtime regulations since 2004.
 

$47,476 Threshold and December Effective Date

The final rule differs in several ways from the original proposal released last summer. Firstly, it mandates that workers earning up to $47,476 annually ($913 per week) be made eligible for overtime pay even if they classify as a professional or manager under the Fair Labor Standards Act. While lower than the originally proposed $50,440 threshold, the new number is still double the old minimum for exemption—$23,660. The old minimum for overtime exemption was just below the poverty line for a family of four.


The new threshold represents the 40th percentile of earnings of full-time salaried workers in the census region with the lowest average wages. The rule establishes that this number will refresh every three years.


All of these changes will take effect much later than initially expected. Washington observers had originally predicted that the DOL would only give employers 60 days—the mandated minimum for rule changes—to comply with the new rules. Instead, the rule gives employers until December 1, or nearly 200 days, to fall in line.
 

An Early Arrival

Interest groups representing employers had pushed hard against the rule changes. The Society of Human Resources (SHRM), perhaps one of the the changes’ most vocal detractors, had actively lobbied against them as part of its annual legal conference. The organization’s efforts, plus those of others, prompted Republican senators in March to introduce legislation that would block the changes. Even if the legislation were to survive both houses, President Obama—who first instructed the DOL to act on overtime in 2014—wields veto authority.


Those close to the DOL initially expected the rule to be released in July. Wednesday's release date is significant. Even if the rule is temporarily stalled by Congress action, its earlier arrival ensures that the rule’s fate would not be pushed to the next presidency. The 1996 Congressional Review Act gives Congress 60 legislative days to attempt to overrule new regulations. Based on the current legislative calendar, May 23 was the last possible day the rule could have been released and still remain fully in this president’s hands.
 

Download our guide to the DOL's new overtime rules and make sure your company is fully compliant by December.