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DOL Releases Overtime Exemption Proposed Rule

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DOL Releases Overtime Exemption Proposed Rule

Tuesday, June 30, 2015

On Tuesday, the Department of Labor (DOL) released a notice of proposed rulemaking (NPRM) that will have a significant impact on providers of disability services, as well as on many other employers nationwide. DOL has been working on the proposed rules since March 2014, when President Obama directed the agency to modernize Federal rules regarding overtime. 

The DOL proposes significant changes to current overtime exemptions for executive, administrative, and professional employees. It also changes the rule regarding highly compensated employees (HCEs). Under current law, a salaried worker who earns at least $23,660/year ($455/week) and performs "primarily" executive, administrative, or professional duties is not subject to the requirement that hours worked beyond 40 in a week be compensated at a rate of one-and-one-half percent of their normal pay rate. What is most significant in the rule is that rather than set a new fixed salary threshold, the DOL proposes to instead establish a mechanism that will automatically update the salary and compensation levels for exempt employees. The new salary threshold would be based on national salary data for full-time workers. This change would mean that the salary threshold would readjust annually as worker salaries change.

Specifically, the rule proposes to set the standard salary level at the 40th percentile of weekly earnings for full-time salaried workers. In 2013, this was $921 per week, or $47,892 annually. In 2016, which is when DOL expects the rule to be finalized, this is projected to be $970 per week, or $50,440 annually. The rule also proposes to increase the salary standard for HCEs to a level at the 90th percentile of weekly earnings. The DOL does not propose any specific changes to current law's duties test, but asks for comments on this topic. The duties test is an area that providers should be concerned about, as duties performed by front-line supervisors in the course of managing subordinates may appear to be direct care work. 

The rule will be published in the Federal Register on July 6. Because this is a proposed rule, the public will have the opportunity to comment on it, and DOL will consider comments and revise the rule before it is finalized. Comments are due by September 4, 2015. ANCOR staff will work to develop comments to submit and encourages individual providers to submit comments, also. We welcome member input, particularly information on how this proposed rule, if implemented as written, would impact your employees and your ability to deliver services. Please contact Katherine Berland ([email protected]) or Esme Grant ([email protected]) if you have questions or if you would like to contribute any information. 

More information about the rule, including a fact sheets and resources, may be found on DOL's website here.