In the fall of 2016, President Obama and the US Department of Labor (DOL) unveiled their Final Rule to unilaterally change the nation's overtime pay law. The rule change, which was slated to go into effect on December 1, 2016, would dramatically expand the number of employees who can qualify for overtime pay. The proposed rule will raise the threshold for guaranteed overtime pay from a salary of $23,660 to $47,476 (or from $455 to $913 per week) beginning December 1, 2016.
In a surprising twist, a federal judge in Texas issued a nationwide injunction just before the rules went into effect, halting enforcement of the rule until the case is decided. At this point, the rule is in limbo, with some speculating that the judge will issue a permanent injunction blocking the rule and others speculating that the Trump Administration will take steps to repeal it by issuing new regulations. Regardless of the outcome, the Michigan Chamber will continue to keep you updated on this important issue.
Other things to know about the rule:
- The proposed rule will raise the threshold for guaranteed overtime pay from a salary of $23,660 to $47,476 (or from $455 to $913 per week) beginning December 1, 2016.
- The salary threshold will be tied to the 40th percentile for full-time salaried workers in the lowest income Census region (currently the south) and will be updated every three years. If economic modeling projections prove to be accurate, it could rise to more than $51,000 annually when the first update takes effect on January 1, 2020.
- The rule specifies that the salary level for employees who qualify for the "highly compensated employee" exemption will rise from $100,000 per year to $134,004 per year beginning in December 2016. This level is the annual equivalent of the 90th percentile of full-time salaried workers nationally and also will be adjusted every three years to the 90th percentile of all US salaried workers.
- The rules are complex, and there are serious financial consequences if you are found to be in violation of them. The DOL's budget for Fiscal Year (FY) 2017 includes $277 million for wage and hour division enforcement, an increase of $50 million from FY 2016.
- If the rule goes into effect, employers should fully expect the DOL to audit employers to ensure compliance.
Where We Stand:
The Michigan Chamber submitted comments to the DOL in opposition to the rule change, arguing the proposed rule went too high, too fast and should be reconsidered because of the impact it would have on employers and employees alike. Unfortunately, the DOL largely ignored those comments and hundreds of thousands of similar comments from the business community across the nation, setting into motion one of the most aggressive forms of federal government interference in wages we’ve seen in a decade or more.
We support efforts to challenge the rule both in the US Congress and in the courts.