Final Overtime Rule’s Release Date Remains Uncertain

By Allen Smith, J.D. Feb 17, 2016
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It’s still anyone’s guess when the final overtime rule will be released. The later in the year it is published, though, the greater the chances that the rule will be overturned by the next Congress and president or the courts.

While Secretary of Labor Thomas Perez told Bloomberg BNA in a Dec. 16, 2015, interview that he was “confident” the final rule would be issued by spring 2016, the Labor Department’s regulatory agenda pegged July 2016 as the release date. The department typically does not release rules before their projected regulatory agenda dates. Moreover, the department has not yet sent the proposed final rule to the Office of Management and Budget (OMB) for review, which can be a time-consuming process.

Labor Department projections on the final rule’s publication range from late spring to late summer to early fall, noted Alfred Robinson Jr., an attorney with Ogletree Deakins in Washington, D.C., and former acting administrator of the department’s Wage and Hour Division.

“Secretary Perez keeps saying spring,” noted Alexander Passantino, an attorney with Seyfarth Shaw in Washington, D.C., and another former acting administrator of the Wage and Hour Division. “In reality, those dates are not that far apart,” referring to May and July of this year.

Part of the impetus for publishing a rule by May of this year is that final rules submitted to Congress after May 16, 2016, may be rejected in 2017 by a new Congress and new president under the Congressional Review Act (CRA), if Congress remains controlled by Republicans and Republicans win the White House. Such a rejection may be a long shot, though—the CRA mechanism has been used to successfully overturn only one agency final rule: a 2000 Occupational Safety and Health Administration rule related to workplace ergonomics standards, according to the Library of Congress’ Congressional Research Service.

Nonetheless, Passantino said he was sure that the Labor Department was feeling pressure to issue a final rule by May 16. “The AFL-CIO has a website petition asking the administration to finalize the rulemaking to avoid CRA coverage,” he noted. “Regardless of the pressure, however, the department is legally obligated to review the nearly 300,000 comments it received. And it must prepare the appropriate preamble and economic analysis. All of that takes time.”

Rule’s Impact

According to the Labor Department, the overtime rule’s new minimum salary threshold increase (from $455 per week/$23,660 per year to $970 per week/$50,440 per year) for exempt workers and annual increases in the minimum salary threshold will result in 10 million employees being reclassified from exempt to nonexempt over the next 10 years. In 2016 alone, 4.6 million workers face reclassification. The minimum salary threshold triggers exempt status—exempt, that is, from overtime pay.

“Many are concerned the department has underestimated the impact of the rule and that far more employees will be affected,” the Society for Human Resource Management and other associations stated in a Feb. 11, 2016, letter to Congress. “Public-sector employees, who often are paid less than their private-sector counterparts and tend to receive more of their compensation in benefits, which are not counted in the salary threshold calculation, will be particularly impacted.”

OMB’s Office of Information and Regulatory Affairs (OIRA) must review the regulatory flexibility analysis and cost projections to ensure that they are sound and rational, Robinson noted. The office also is obligated to meet with interested parties. A failure by OIRA and OMB to conduct an adequate due diligence review of a proposed final rule could be fodder for litigation, he added.

Passantino said employers should be considering now how they might deal with a salary threshold increase to $50,440 per year. “Regardless of when the final rule is published, they are looking at, probably, 60 days for an effective date. An employer hoping to come into compliance without having thought about the issues prior to that time is going to be way behind the eight ball.”

Legal Challenge?

Paul DeCamp, an attorney with Jackson Lewis in the firm’s Washington, D.C., office and a former administrator of the Wage and Hour Division, remarked, “The odds of litigation over the rule are pretty close to 100 percent. It is very difficult to envision any realistic scenario in which this regulation does not end up in litigation.”

Tammy McCutchen, an attorney with Littler in Washington, D.C., and a former administrator of the Wage and Hour Division, said that the "best chance for a legal challenge is if DOL includes annual automatic increases for salary level or makes changes to the duties test.”

DeCamp added, “If the department waits too long, it raises the risk that one cranky judge in a forum of a plaintiff’s choosing could enjoin the regulations long enough to run out the clock on this administration, which becomes either a game changer or a nonevent, depending on who replaces President Obama.”

Allen Smith, J.D., is the manager of workplace law content for SHRM. Follow him @SHRMlegaleditor.​

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