U.S. Department of Labor is seeking your input on the FLSA overtime exemptions

On July 26, 2017, the U.S. Department of Labor (DOL) published a Request for Information (RFI) seeking input from the public regarding the payment of overtime to administrative, executive and professional employees. If you wish to be heard or to offer your comments on overtime, you can submit comments through Sept. 25, 2017. The DOL is soliciting feedback on 11 sets of questions relating to the salary level test, the duties test, varying costs of living across different parts of the U.S., the inclusion of non-discretionary bonuses and incentive payments to satisfy a portion of the salary level, the salary test for highly compensated employees and the automatic updating of the salary level test.   

Employees that are classified as exempt under the Fair Labor Standard Act (FLSA) typically do not receive overtime compensation for the hours they have worked in excess of 40 hours in a workweek. To qualify for exempt status under the administrative, executive or professional exemptions, employees must satisfy both a salary and a duties test. They must be paid the same amount each week in which they perform any work without regard to the number of hours and their work activities must meet certain standards. For instance, to be exempt as an executive, the employee typically must supervise more than one employee.  

During the Obama Administration, after notice and comment, the DOL increased the salary test from $455 per week to $913 per week. It did not change the duties test. Therefore, to satisfy the salary test, an administrative, executive or professional employee had to be compensated a minimum $913 per week, which was a sizable increase from $455 per week. Many stakeholders were concerned that this large salary increase would essentially eliminate the duties test and disqualify many workers whose duties otherwise would have qualified them as exempt. Just before the new salary test was to take effect, 21 states and business groups brought litigation to stop the enforcement of the Rule. A federal district court judge in Texas enjoined the enforcement of the new overtime rule and that decision has been appealed to the Fifth Circuit. All the briefs have been filed and oral argument is tentatively scheduled for the week of Oct. 2, 2017.

The Trump Administration has indicated that it seeks to reduce the amount of regulation for businesses. The DOL now is seeking comment and information regarding overtime using the RFI. For the full RFI and questions presented, click here.

If you have an interest in the overtime regulations, you may submit comments to the following questions. You can comment on one or all of the questions, which are paraphrased below.

1. Should the DOL update or include inflation in the 2004 salary level of $455 per week? What measure of inflation should be used?
2. Should the DOL use multiple standard salary levels? If so, how should the levels be set—by employer size, region, state, metropolitan statistical area?
3. Should the DOL set different standard salary levels for the executive, administrative and professional exemptions?
4. Should the standard salary level be set within the historical range of the short test salary level, the long test salary level, between the two levels or should the DOL use some other methodology?
5. What is the impact of the salary level on the duties test? At what salary level does the duties test no longer fulfill its historical role in determining exempt status?
6. What changes did employers make in anticipation of the effective date of the 2016 Final Rule and what changes, if any, did employers take after the preliminary injunction was entered?
7. Should the DOL use only a duties test without regard to the salary received? If so, what elements would be necessary in a duties only test and would the percentage of non-exempt work be considered?
8. Did the increased 2016 salary test exclude certain traditionally exempt occupations?
9. Should the DOL include nondiscretionary bonuses and incentive payments (including commissions) to satisfy some percentage of the standard salary level?
10. Should there be more than one compensation level for the highly compensated employee exception? How should be it set?
11. Should the standard salary level and highly compensated employee levels be automatically updated? If yes, by what mechanism?

Comments and information are welcome electronically at www.regulations.gov through Sept. 25, 2017. All comments submissions must include the agency name and Regulatory Information Number (RINM 1235-AA20). You are encouraged to submit one copy of your comments by one method (email or mail). Responders also are advised that all comments received will become a matter of public record and will be posted without change, including any personal information provided.

If you have questions regarding the U.S. Department of Labor’s Request for Information, please contact one of Chuhak & Tecson’s employment attorneys.

This Chuhak & Tecson, P.C. communication is intended only to provide information regarding developments in the law and information of general interest. It is not intended to constitute advice regarding legal problems and should not be relied upon as such.

Client alert authored by: Jeralyn H. Baran, Principal

This alert originally appeared in the August 2017 Employment Focus newsletter.