The U.S. Department of Labor (DOL) recently issued two notices of proposed rulemaking (NPRM) that would make changes to the Fair Labor Standards Act (FLSA).
Increasing the FLSA exemption threshold
On March 7, DOL proposed a NPRM that would change pay standards for overtime exemptions under FLSA.
Since 2004, an employee with a salary below $455 per week ($23,660 annually) must be paid overtime if he or she works more than 40 hours per week. The new proposal would update the salary threshold from $455 to $679 per week (equivalent to $35,308 per year).
Several years ago, the Obama administration’s labor department proposed rule changes that would have raised the salary threshold amount to $913 week ($47,476 annually). The 2016 rule sparked significant objections from the business community and was enjoined by a Texas federal district court on Nov. 22, 2016.
Unlike the prior proposal, the new proposed changes to the rule do not contain an automatic increase or schedule to update the salary level over time. Subsequent updates would require the notice and comment rulemaking process. However, DOL stated its commitment to periodically reviewing and updating the salary threshold. It has asked for guidance and comments on this issue, but suggests every four years as an appropriate timeframe for reviewing and making periodic updates.
Notably for schools, the NPRM does not change the duties test and continues to exempt certain professionals from the salary test, including teachers. These individuals are not entitled to overtime regardless of their salary.
More information about the proposed rule is available at www.dol.gov/whd/overtime2019. The Department encourages any interested members of the public to submit comments about the proposed rule electronically on or before May 21, 2019 at www.regulations.gov, in the rulemaking docket RIN 1235-AA20.
Clarifying “regular rate” calculations
On March 28, DOL issued a NPRM announcing proposed updates to the rules that govern how employers calculate overtime payments under FLSA.
Currently, FLSA requires employers to pay additional compensation to non-exempt employees for work that exceeds 40 hours in a work week. Overtime is paid at a rate of time-and-one half, usually using an employee’s “regular rate” of pay. The “regular rate” is a statutorily-determined term that includes all forms of remuneration paid by the employer in exchange for employment, subject to certain exclusions set forth in FLSA’s rules.
The proposed changes seek to clarify the regular rate exclusions in the context of “today’s workplace,” and direct an employer to exclude the following when computing an employee’s “regular rate” of pay (and therefore not factor them into the rate when computing an employee’s overtime rate):
- An employer’s cost of providing wellness programs, onsite specialist treatments, gym and fitness membership and employee discounts on the employer’s goods and services.
- Payments to employees for unused paid leave, including paid sick leave.
- Reimbursed business expenses that are incurred for the mutual or combined benefit of employer and employee.
- Reimbursed business travel-related expenses, such as flights and living expenses, that meet certain regulatory requirements.
- Discretionary bonuses, when not expected regularly.
- Tuition reimbursement and debt repayment programs.
- Payments for bona fide meal programs, which are not considered hours worked unless agreed upon by the parties.
The proposed changes also include a revision to the section excluding “show up” pay (i.e., pay made in addition to pay for hours worked when the employer provides less than a set minimum number of work hours), “call back” pay (i.e., additional compensation paid to employees for showing up to work to perform extra work after regularly scheduled hours have ended), and similar types of pay. This change replaces the requirement that such categories of work hours be “infrequent and sporadic,” stating that they simply must be “without prearrangement.”
More information about the proposed rule is available at www.dol.gov/whd/overtime/regularrate2019.htm. The Department encourages any interested members of the public to submit comments about the proposed rule electronically on or before May 28, 2019 at www.regulations.gov, in the rulemaking docket RIN 1235-AA24.
OSBA will continue to monitor the rules and provide updates as they become available.