HR Policy Weighs In on Overtime Exemptions Rule

HR Policy Association submitted comments in opposition to the Department of Labor’s Proposed Rule that would significantly raise the salary thresholds for overtime exemptions under the Fair Labor Standards Act. The comments highlighted the Proposed Rule’s significant compliance problems and associated costs for employers. 

Background: Earlier this fall, the Department of Labor issued a Proposed Rule that would substantially increase both salary thresholds for overtime exemptions under the Fair Labor Standards Act – over $59,000 for most positions and nearly $144,000 for “highly compensated employees.” The Rule would make millions of employees newly eligible for overtime, and contains an automatic indexing provision that would increase the thresholds every three years based on inflation. 

The Association’s comments highlighted major compliance problems associated with transitioning potentially thousands of employees in each employer’s workforce as a result of the Proposed Rule – including repeating the process every three years to comply with the Rule’s automatic increases. The comments further argued: 

• The Proposed Rule inhibits flexibility for employees, as many employees will suddenly become hourly workers required to track their hours, which could limit remote and flexible work arrangement opportunities.
   
• Many employees will consider being transitioned to nonexempt, hourly status as a demotion. Further, career growth (or motivation for same) may be inhibited given the hard 40-hour per week cap. 
  
  
• The Proposed Rule could contribute to the ongoing talent crunch, particularly in STEM fields. Entry-level jobs in low cost of living areas that would become nonexempt/hourly under the Proposed Rule may be less attractive (in comparison to salaried jobs) to individuals newly entering the workforce. 
  
  
• The Proposed Rule does not allow enough time for compliance (60 days). Given the large number of employees who will be affected by the Rule, employers will need more time to comply. 

Proposed Rule unlawful: The Association also joined as a signatory to comments submitted by the Partnership to Protect Workplace Opportunity, of which the Association is a leading member. These comments articulated many of the same policy concerns as the Association’s own comments as well as highlighted how the Rule is beyond the DOL’s legal authority. 

Outlook: A final rule could be issued sometime next year and is extremely likely to be met with an immediate legal challenge. A similar rule promulgated by the Obama administration was successfully invalidated in federal court.