DOL Raises Overtime Exemption Threshold to $47,476 a Year

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Today, Vice President Joe Biden, Department of Labor (DOL) Secretary Tom Perez and Sen. Sherrod Brown (R-Ohio) announced the release of the final rule amending federal overtime pay requirements under the Fair Labor Standards Act. Employers have been bracing for the new rule, which dramatically increases the number of salaried employees eligible for overtime pay.

The new federal overtime rule:

  • Guarantees time-and-half pay to any salaried employee earning under $47,476 a year ($913 a week) and who works more than 40 hours in a week. That’s double the current salary threshold of $23,660 ($455 a week).
  • Automatically updates the salary threshold every three years, tying it to the fortieth percentile of full-time salaried workers in the lowest-income census region (currently the South). Based on current wage trends, the DOL projects a salary threshold of $51,000 at the first update on Jan. 1, 2020.
  • Allows certain bonuses and incentive payments to count toward of the new salary level for the first time. (Payments are accredited up to 10 percent.)

The rule goes into effect on Dec. 1, 2016. DOL has issued a fact sheet, Q&A document, and press release on the rule; all of which can be found here. DOL has also prepared a three-page overview which you can read here. DOL has also published a useful guide on the “white collar” exemptions available here.

Industry concerns

Hospitality businesses operate on thin margins with low profits per employee and little room to absorb added costs. More than doubling the current minimum salary threshold for exempt employees, while automatically increasing salary levels, will harm restaurants, lodging establishments and the employer community at large.

Since March 2014, both the National Restaurant Association (NRA) and American Hotel & Lodging Association (AH&LA) have been raising concerns about impacts to the industry from rule changes. The modification was prompted in when the President issued a memorandum directing the Secretary of Labor to update the exemptions. By July 2015, DOL had published draft revisions to the rule that included increasing the threshold to $50,440 with automatic updates on an annualized basis.

While the final salary threshold announced today is lower than the proposed $50,440, it is still too high. Additionally, the rule does not address the regional disparities inherent to such a one-size-fits-all approach.

Opposition will continue

Hundreds of lawmakers have joined with employer and nonprofit groups in criticizing DOL for failing to accurately estimate the rule’s impact. The NRA and the AH&LA have been working on legislative efforts to defund, block or nullify the rule.

At the AH&LA Legislative Summit, which is currently underway in Washington, DC in partnership with Asian American Hotel Owners Association, hoteliers are urging members of congress to support S. 2707 and H.R. 4773, the Protecting Workplace Advancement and Opportunity Act. The Act would roll back these damaging rule changes and force DOL to complete an economic impact study before taking any action.

The NRA is considering litigation against the DOL over its process for issuing the final rule and some of its mandates. It will continue to use all available legislative and legal options to block the detrimental rule changes.

Member Webinars

The NRA will hold a free informational webinar for members on Thursday, May 26, 12:00 p.m PST. It will be hosted by attorneys Angelo Amador, Senior Vice President and regulatory counsel at the NRA, and Alex Passantino, partner at Seyfarth Shaw and former Acting Administrator of the U.S. Department of Labor’s Wage and Hour Division. Click here to register.

AH&LA members are invited to participate in a webinar with AH&LA and the Labor and Employment Law firm of Morgan, Lewis and Bockius. The webinar will provide details on key elements of the new overtime regulations, the compliance timeline, implementation steps that hotels must take and key challenges the hospitality industry must address moving forward. It takes place on Thursday, June 2 at 11 a.m. PST, and members can register here.

The WRA and WLA will continue to provide analysis and updates on this important regulatory change.