DOL Issues Long-Awaited Proposed Overtime Rule
On March 7, 2019, the United States Department of Labor (USDOL) issued the long-awaited Notice of Proposed Rule Making (NPRM) which proposes changes to the Fair Labor Standards Act (FLSA) overtime provisions. These proposed changes, which are detail in the 219-page document, follow nearly three years of legal actions challenging the USDOL’s 2016 proposed FLSA overtime changes.
A quick history on these proposed changes. On May 23, 2016, the USDOL issued the 2016 FLSA proposed overtime rule changes that would have more than doubled the minimum salary thresholds for the so called “white collar” overtime exemptions. Under the 2016 proposed rule, the minimum salary threshold would have increased from $455 per week ($23,660 per year) to $913 per week ($47, 476 per year) and the Highly Compensated Employee (HCE) salary level from $100,000 to $134,000 annually. Just before the changes were about to become effective, the United States District Court for the Eastern District of Texas invalidated the proposed rule stating that the USDOL lacked the authority to propose these changes. Shortly thereafter, the proposed changes were put on hold.
This latest proposed rule formally rescinds the 2016 proposed rule and would provide for updates to the standard salary level for each exemption. Under this proposal, the minimum salary threshold would increase from $455 per week ($23,660 per year) to $679 per week ($35,308 per year). The minimum threshold is based upon the 40th percentile of earnings for full time employees in the lowest wage Census Region. In addition, the Highly Compensated Employee (HCE) salary level is increasing from $100,000 to $147,413 annually. Which is based upon the 90th percentile of full-time earnings nationally. These new salary thresholds utilize the same methodology that was utilized in establishing the 2004 FLSA overtime salary thresholds. In the proposed rule, the USDOL reasoned that these methodologies must be reasonable as they have sustained since 2004 without any legal challenges.
The proposed rule also permits incentive pay and bonuses to count towards up to 10% of the standard salary level provided it is paid at least annually. This expands the requirement under the 2016 proposed rule which would have required payment quarterly. In addition, the USDOL states that they intend to propose additional rules that would provide for an adjustment to the standard salary thresholds every four years. The NPRM states that any regular adjustments to the standard salary thresholds would be subject to the Notice of Proposed Rule Making process each time any change is proposed. This is a change from the 2016 proposed rule which provided for automatic adjustments to the salary thresholds every three years to prevent the standard salary threshold from becoming outdated.
Currently, there are three major exemptions from the FLSA overtime Regulations, Executive, Administrative, and Professional. Each utilize a two-prong test to determine if the employee meets the exemption from overtime protection. The US Department of Labor has existing resources and tools to assist employers with complying with the FLSA. These resources can be found on a webpage for employers. While we recognize that most EMS agencies workforce is paid on an hourly basis and are subject to overtime pay provisions. However, it is still important to agencies to conduct an FLSA analysis of all positions to ensure compliance with the FLSA.
It does not appear that the Department has issued compliance assistance for employers that specifically addresses the latest proposed rules. The American Ambulance Association has resources available to assist our members with evaluating how these changes might impact your operation. We will be sure to provide our members with further information and guidance, as it becomes available, regarding this or any other Human Resource or employment related issue that will impact the ambulance industry.