Is the DOL Lowering the Salary Threshold in its Overtime Regulations?


As the Office of Management and Budget continues to consider the DOL’s proposed regulations – to drastically increase the minimum salary that employees must be paid in order to be exempt from payment of overtime – industry groups are stepping up their opposition, meeting regularly with government officials to educate them on the impact the new rules will have. For example, CUPA-HR, a group of Human Resources professionals in higher education, recently met with the administration to share their concerns about the impact of the rule, particularly in light of the fiscal pressure already faced by many public colleges and universities. For the first time, there is some indication that the loud and forceful opposition from various business groups may be making a difference.

News reports indicate that DOL is now considering a threshold of $47,000 per year, rather than the proposed $50,400. This small decrease will certainly reduce the number of employees who would be entitled to overtime. However, the proposed rule will still have a dramatic impact on businesses, especially small businesses, non-profits, and companies in areas of the United States where wages are generally lower than the national average. Consider that even the reduced threshold is still more than 10% higher than the state-mandated minimum in California, a state with a generally high cost of living.

The DOL’s proposed rule may also have significant political implications, which are important given the upcoming election. Most business groups are still advocating for an even lower threshold, while labor unions are pushing to keep the salary level high. It remains to be seen whether there will be any more movement or delay in the publication of the final rules, which are anticipated within a month, with a possible effective date as early as September 2016.

Opinions and conclusions in this post are solely those of the author unless otherwise indicated. The information contained in this blog is general in nature and is not offered and cannot be considered as legal advice for any particular situation. Any federal tax advice provided in this communication is not intended or written by the author to be used, and cannot be used by the recipient, for the purpose of avoiding penalties which may be imposed on the recipient by the IRS. Please contact the author if you would like to receive written advice in a format which complies with IRS rules and may be relied upon to avoid penalties.