Proposed Rule to Raise Overtime Threshold

4/21/2016 10 Considerations in Choosing a Freight Audit and Payment Provider


We need every member of TIA to contact their Federal elected officials in support of H.R. 4773 and S. 2707, the "Protecting Workplace Advancement and Opportunity Act." This Act would nullify the proposed rule and require a comprehensive study be done before final implementation.

To write your Members of Congress, please click HERE. All you have to do is simply input your information into the website and click send. TIA has written a form letter on your behalf. If you would like to make the letter more personal, please feel free to edit the letter as you see fit.

Background:

In mid-March, the Department of Labor (DOL) sent a rule which would raise the annualized salary threshold to $50,440 for workers before they are exempt from overtime pay to the Office of Management and Budget (OMB) for approval. At this pace, a final rule could be issued as soon as May 2016. While there are two bills pending in Congress to prohibit this change, it is unlikely that either bill could pass Congress or overcome a virtually certain Presidential veto.

Specific notable components which were included by the DOL in the proposed rule include:

  • Increasing the salary threshold. The current minimum salary a worker has to be paid to be exempt from overtime is $455 per week or $23,660 per year. Under the proposed rule, it would jump to $970 a week or $50,440 per year. The DOL calculated that $50,440 would equal the 40th percentile of weekly earnings for full-time salaried workers.
  • Increasing the highly compensated employee threshold. The total annual compensation requirement needed to exempt highly compensated employees would climb to $122,148 from $100,000 — or the 90th percentile of salaried workers’ weekly earnings.
  • Automatically increasing future salary thresholds. For the first time ever, the salary thresholds would be tied to an automatic-escalator. The DOL proposes using one of two different methodologies to do this — either keeping the levels chained to the 40th and 90th percentiles of earnings, or adjusting the amounts based on changes in inflation by tying them to the Consumer Price Index.
  • No changes to the duties tests have been proposed. The DOL did not suggest changing the executive, administrative, professional, computer or outside sales duties tests as of yet. However, the agency sought comments on whether they should be changed and whether they are working to screen out employees who are not bona fide white-collar exempt employees. Early indicators were that the DOL would look to adopt a Californiastyle rule in which employees would be required to spend more than 50 percent of their time performing exempt duties to be classified as exempt.
  • Discretionary bonuses would not count toward salary threshold. In the proposed rule, discretionary bonuses were not part of a person’s salary calculation — but that could change depending on the comments the agency received. Currently, such bonuses are only included in calculating total compensation under the highly compensated employee test. But the DOL said some stakeholders are asking for the broader inclusion of bonuses in salary calculations.