On July 12, the Department of Labor’s (DOL’s) Wage and Hour Division (WHD) sent to the White House (the Office of Management and Budget’s (OMB’s) Office of Information and Regulatory Affairs (OIRA)) for review its proposed changes to the white-collar exemption from overtime (OT) rules. This is the last step prior to finalizing a proposed regulation.

Currently, administrative, professional, and executive workers are exempt from the Fair Labor Standards Act’s (FLSA’s) overtime rules if they work in a job that puts them in a position of control/authority (as defined) and if they earn more than $35,568/year. It is possible that the new final rule will adjust the scope of work prong of the exemption test (the piece requiring the worker to be in a position of control/authority), but most insiders believe that the new regulation will focus on the salary threshold.

Previous proposals to update the white-collar exemption have proposed raising the salary threshold to as much as $82,732 by 2026, and to include an automatic trigger to adjust that threshold upward to reflect inflation. An Obama Administration white collar exemption rule raised the salary threshold to $47,476, with automatic inflation triggers, but a U.S. district court in Texas invalidated that rule in 2017.

Prospects: There has been considerable push-back from industry against raising the white-collar exemption salary threshold, with impacted businesses arguing that they cannot afford the costs associated with a dramatic change to the white-collar exemption to the OT rules. In light of nearly unanimous opposition from industry, it is possible that WHD will be proposing either a lower new salary threshold, or a longer phase-in period. Typically, OIRA takes weeks or even months to review a regulation prior to finalization, but the ruling could come more quickly.

NAIFA Staff Contacts: Diane Boyle – Senior Vice President – Government Relations, at DBoyle@naifa.org; or Jayne Fitzgerald – Director – Government Relations, at jfitzgerald@naifa.org; or Michael Hedge – Senior Director – Government Relations, at mhedge@naifa.org.