Finance News & Insights

3 key factors shaping DOL’s plans for new overtime regs

The Obama administration is dead set on increasing overtime availability for workers.
In fact, when President Obama announced his intention to amend the current FLSA overtime regs, even the DOL was surprised by the move.

Now employers are wondering exactly when those changes will take place and what the impact will be.

An expert’s insight

One of the best places to go for that info is Tammy D. McCutchen, a former administrator of the DOL’s Wage and Hour Division (WHD).

Not only was McCutchen instrumental in drafting the most recent changes to the OT regs (enacted in 2004), she also participated in a number of recent “listening sessions” with DOL Secretary Thomas Perez on the current rulemaking process.

These sessions involve the agency soliciting the feedback and questions of employers and employment groups.

At the 2014 SHRM Conference & Exposition in Orlando, McCutchen spoke to attendees about when employers can expect the final rules (not just the proposed version) as well as the methods the DOL is currently considering to overhaul the current regs.

Here are the highlights:

Ready by 2015?

The DOL recently said it expects to have proposed rules on the “white collar” OT exemption by November of this year. But when can firms expect the final rules to actually take effect?

McCutchen said she expects the DOL to move faster than usual with this rule change. In her estimation, the final rules are likely to be published by September 2015 – and likely to go into effect by January 1, 2016.
3 critical DOL questions

To come up with the most efficient way to change the regs, Secretary Perez is asking three main questions:

1. What should the salary level be moving forward? One thing is certain about the new OT regs: The salary level – currently $455 per week or $23,660/year – will be increased.

Currently, the agency is looking at the most effective ways to raise this level and according to McCutchen, these are the front-runners:

  • Raise the minimum salary level – after adjusting for inflation – to 1975’s level. That would bump the minimum salary level all the way up to $50,000 per year and force many firms to change the status of many employees they had previously classified as exempt.
  • Adopt the California salary level. This method relies on auto-corrections for inflation. Based on today’s standards, that level would be $570 per week.

2. What changes should be made to the duties test? The DOL also plans to increase the availability of OT by amending the current duties test.

The agency is likely to narrow the duties test – rather than make wholesale changes – and simplify language in the current regs. It’s also likely to specifically spell out more jobs which are definitely OT exempt.

Also, the agency will probably revise the “concurrent duties” regs under the executive exemption test; this gives managers an exemption even if they’re doing the same work as direct reports.

The DOL is seriously considering adopting California’s duties test instead, which requires an exempt manager to spend more than 50% of his or her time supervising employees.
Bottom line: Prepare for more borderline workers to be eligible for OT as soon as the new regs pass.

3. What can the DOL do to streamline the process? According to McCutchen, the DOL realizes this is a massive undertaking. As a result, it’s looking to employers for suggestions and insight to make the new rules as clear and effective as possible.

Adapted from “It’s 7AM: Do You Know Where Your Overtime Is Headed?,” by Tammy McCutchen and Michael Lotito, presented at the 2014 SHRM conference in Orlando, FL.

Print Friendly

Subscribe Today

Get the latest and greatest finance news and insights delivered to your inbox.