Changes to DOL’s Overtime Rules Are Imminent – What You Should Know

With the continuing expansion of contingent workforce activity, it becomes more and more common for companies to engage contingents in managerial roles and even – in some cases – executive positions. That’s why it is important for hiring organizations to pay attention to changes in overtime rules that will affect both the full-time and contingent workforce. And, it would appear, changes to overtime rules are coming down the pike! Here’s what you might expect.

Employment law experts are suggesting new overtime rules might be handed down by the US Department of Labor within the next month or so. The new rules are likely to recommend increased salary level thresholds for white collar exemptions to the overtime rules already in place. If the expected changes occur, boosting the salary threshold will likely mean a whole new segment of workers are entitled to overtime pay. Here’s what the threshold change may look like.

The Trump administration had last implemented new salary level thresholds in 2019, boosting the limit from a modest $455 per week (which is quite low for a white-collar salary in today’s dollars) to $684 per week or $35,568 per year. However, the Trump DOL did not adopt the automatic cost of living (COLA) increase. As part of its pledged commitment to supporting the working class, the Biden administration is expected to push that weekly threshold higher yet. Some industry watchers say the salary figure is still artificially low and should be closer to $90,000 per year or $1,730 per week. There is some debate on whether or not they will also reinstate the automatic COLA increases that had been in place during the Obama administration.

Should the updated rules drive the threshold to anywhere near $1,730 per week, it would make many more contingent workers eligible for overtime pay. This would have significant implications for contractor spend as a larger number of formerly exempted contingents would suddenly become eligible for overtime.

Society for Human Resource Management (SHRM) analysts note that employers should also refocus on the duties tests section of the DOL’s overtime rules – noting the tendency of employers to over-emphasize the salary requirement when determining eligibility for exemption. SHRM boils down the three white-collar exemption duties tests quite neatly.

“Executive exemption. The employee’s primary duty must be managing the enterprise or a department or subdivision of the enterprise. The employee must customarily and regularly direct the work of at least two employees and have the authority to hire or fire workers (or the employee’s suggestions and recommendations as to hiring, firing or changing the status of other employees must be given particular weight). 

Administrative exemption. The employee’s primary duty must be performing office or nonmanual work that is directly related to the management or general business operations of the employer or the employer’s customers. The employee’s primary duty also must include the exercise of discretion and independent judgment with respect to matters of significance.

Professional exemption. The employee’s primary duty must be to perform work requiring advanced knowledge in a field of science or learning that is customarily acquired by prolonged, specialized, intellectual instruction and study.”

Changes are imminent and it pays to stay ahead of the curve. Have questions about this? Contact nextSource today to speak with an expert.