DOL Publishes RFI to Revise Overtime Exemption Rule

On July 25, the Department of Labor (DOL) released a Request for Information (RFI) regarding the DOL Overtime Exemption rule (also called the “White Collar” rule) that was finalized in May 2016, and that had been set to go into effect on December 1, 2016 but was halted by litigation. The regulation changed the salary threshold under which exempt executive, administrative, and professional employees must be compensated for overtime worked as required by the Fair Labor Standards Act (FLSA). Historically, there have been three components to the test for exemption, which have been updated and revised over the years: the salary test, the salary basis test, and the duties test. The last time the rule was updated was in 2004, when the threshold was set at $23,660/yr. The 2016 regulation set the threshold using a percentile rather than a fixed amount, at the 40^th percentile of full-time workers salaries in the lowest-wage Census region (currently the south), which worked out to $47,476/yr. The 2016 regulation also included an auto-update mechanism, which would have reset the threshold based on salary data every three years.

The rule was not implemented as scheduled on December 1, 2016 due to litigation challenging the authority of the DOL to promulgate it. The court issued an injunction in November 2016, which has remained in place. Soon thereafter, the Obama Administration which led the construction of the 2016 rule transferred leadership to the Trump Administration.  Given the change in administrations, in June 2017, the DOL filed a brief with the court saying they did not plan to defend the $913/week threshold in the 2016 rule, but do want the court to rule on whether the DOL has the authority to use salary level as an indicator of exempt status. It also indicated it would engage in new rulemaking to revise the regulation, including to determine the appropriate salary level, and would issue an RFI to gather public comments in advance of drafting a Notice of Proposed Rulemaking (NPRM).

In 2016, ANCOR through its Save Our Services Campaign strongly urged DOL to work with CMS to better understand the funding model of Medicaid and ensure that no unintended consequences would result from the implementation of the rule. When the final rule was issued, it was accompanied by a time-limited non-enforcement policy that was targeted to HCBS providers, which was a direct result of the advocacy efforts that ANCOR led in response to the rule.

RFI comments are due on September 25, 2017. Some specific areas that the DOL has asked for input on are:

• Inflation rate ­– Whether updating the 2004 salary level for inflation would be appropriate and if so what measure of inflation to use? If the threshold is raised using an inflator, should there be changes made to the duties test?
• Multiple salary levels based on employer size/location – Whether the regulation should have different salary levels based on employer size, census region or division, state, metropolitan area, or some other method? This would be similar to the federal government’s use of general schedule locality areas that adjust for different costs-of-living based on geographic location.
• Multiple salary levels based on employee type – Prior to 2004, there were different salary levels for the different types of exempt employees. Should DOL return to having a lower threshold for executive and administrative employees than for professional employees?
• Long/short duties test – In 2004, the DOL abandoned having two duties test, a long test paired with a lower salary and a short test paired with a higher salary. The RFI asks whether the rule should return to this methodology.
• Relationship between salary and duties – The RFI asks whether the salary level set in 2016 is so high that it makes the duties test irrelevant.
• Employer action based on 2016 rule – The RFI asks for employers to comment on whether they increased salaries, decreased hours, or made other changes in anticipation of the rule, and whether changes made were rescinded when the rule was injuncted.
• Duties only criteria – Would employers prefer an exemption test that relies on duties only, without a salary threshold?

ANCOR will be discussing the association’s strategy on weighing in on the NPRM on the next Government Relations Committee Call (August 10). If you have any questions, please contact Katherine Berland at[email protected].