Proposed Federal Overtime Rules Still Pending

As previously reported, the Department of Labor (DOL) has announced proposed changes to federal overtime rules under the Fair Labor Standards Act (FLSA). However, employers should hang tight as these regulations are still pending, and we may not see any changes until late 2016.

The comment period for the proposed rule closed on September 4, 2015 with 293,370 comments received. By contrast, the agency only received 75,280 comments the last time changes were made to the overtime rule in 2004.

The comment period for the proposed rule closed on September 4, 2015 with 293,370 comments received. By contrast, the agency only received 75,280 comments the last time changes were made to the overtime rule in 2004.

A participant at an American Bar Association conference quoted Solicitor of Labor M. Patricia Smith as stating that the rules would not likely be finalized until late 2016, according to a Wall Street Journal report.

While employers will still want to do advance preparation, they may have more time than initially thought.

The proposed rules would update the salary level for overtime exemption.

If the proposed rules become effective in 2016, the proposed minimum salary level is projected to increase to $970 per week ($50,440 annually).Those employees earning less than this amount would be nonexempt. This change would greatly increase the number of employees entitled to overtime. It would also decrease the ability to have exempt part-time positions.

How would this increase affect California employers? The proposed federal salary threshold is higher than the current salary threshold in California. Under the proposed federal rule, more California employees would potentially be nonexempt under the FLSA and entitled to overtime because they don’t meet the federal minimum salary threshold.

Currently, to be exempt in California, an employee must earn a minimum monthly salary of two times the state minimum wage, which amounts to $3,120 per month and $37,440 a year. Beginning January 1, 2016, the minimum annual salary requirement in California will rise to $41,600 when the state minimum wage increases to $10 per hour.

For example, if the proposed rules go into effect in 2016:

  • Employees making less than $50,440 would be nonexempt under federal law and entitled to overtime under the FLSA rules;
  • Employees making less than $41,600 could also be nonexempt under California law; and
  • Employees making more than $41,600 but less than $50,400 could be exempt under California law but nonexempt under federal law and entitled to weekly overtime under the FLSA.

Employers must comply with the law that gives the most protection to the employee.

More information, including the notice of proposed rulemaking and a fact sheet, can be found on the DOL proposed rulemaking website.

Source: CalChamber  |  2015 © Copyright Payroll Masters

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