Ready or Not, Overtime Rule Changes are Coming Soon

Critics of the Department of Labor's overtime rule changes, which were proposed last July, hoped that the new rules would never become a reality. But whether you are a proponent of the changes or not, get ready because they are on the way, and soon.  If the changes in the originally proposed rules stand, it is estimated that as many as 5 million U.S. worker who were previously exempt from overtime pay will suddenly become eligible to be paid overtime for hours worked over 40 in a week, among other changes.  This will undoubtedly have an enormous impact on businesses, both small and large. 

Somewhat ahead of schedule, the Department of Labor sent the rule changes to the White House Office of Management and Budget (OMB) in mid-March for review, which is the final step before the rule is published. OMB review typically takes 4 to 6 weeks, which means the rule changes could be published in just a few short weeks and become effective as little as 60 days after publication.  This move was surprising to some because last fall the DOL said that the changes to the FLSA overtime eligibility rules probably wouldn't be issued until late 2016.

The rush to publish the new rules likely can be attributed to the fact that this is an election year. Under the Congressional Review Act, Congress has 60 legislative days to review a major rule change before it takes effect. During that time, they can nullify the rule with a resolution of disapproval. The sitting President then has the option to veto the resolution or let it stand. 2016 has a shortened legislative calendar, which means that if the rule is published after about mid-May 2016, the newly elected President will have the option of letting a resolution of disapproval stand or not. Since there is obvious uncertainty as to which party will take office and whether the new President would veto a resolution of disapproval or let it stand, the Department of Labor is expediting the process to avoid the possibility of the rule changes being entangled in the Congressional Review Act and being reversed by the new administration.  

In January, Patricia Smith, the DOL Solicitor of Labor, told a group of attorneys in mid-town Manhattan that part of the DOL's mission is to have an impact on workers that outlives the Obama administration.  She went on to say,

We don’t think about it as a legacy of ours, we have 357 days to put concrete things into motion that will continue to protect workers and their families even when we’re gone.

While it is not yet known how closely the final rule will resemble the one proposed last year or exactly when it will be published, given the political climate and the fact that the Labor Department sent the final rule to the OMB ahead of schedule, all indications are that employers should start planning for major changes as soon as possible.  You can read more about the proposed changes and how employers should start preparing for them here.

By Jennifer Eversole, CPA is a Knowledge Enthusiast and Co-Founder of Management Stack.

"Knowledge inspires ideas.  Ideas inspire innovation.  Innovation inspires achievement. Achievement inspires happiness." - Jennifer Eversole, CPA