Dive Brief:

• The U.S. Department of Labor (DOL) published a Notice of Proposed Rulemaking that proposed changes to employee overtime pay exemptions under the Federal Labor Standards Act (FLSA) in the Federal Register Friday.
• The NPRM proposed to formally rescind the Obama administration's enjoined 2016 rule and suggested a new salary threshold for overtime exemption, increasing it from $23,660 a year to $35,308 a year. DOL made its plans public in a March 8 draft but the formal comment period couldn't start until it was published in the Federal Register. Stakeholders now have until May 21 to comment, and DOL is aiming to finalize a rule early next year.
• Other facets of the rule also remain the same as those in the draft. The NPRM proposes to allow employers to count nondiscretionary bonuses and incentive payments, including commissions, that are paid on annual or more frequent basis as up to 10% of an employee's salary level for the purpose of determining overtime eligibility. The total annual compensation requirement for highly compensated employees would be increased to $147,414 per year from the current $100,000. DOL also repeated a commitment to updating its salary levels every four years via notice-and-comment rulemaking.

Dive Insight:

DOL's formal rulemaking didn't include any surprises, but experts have warned employers in recent days not to be complacent in preparing.

Tammy McCutchen, former administrator of DOL's Wage and Hour Division, told attendees at a conference this week that the rule's publication in the Federal Register doesn't mean the administration will meet its goal of finalizing the rule by the first quarter of 2020. McCutchen, the force behind much of the 2004 update to the overtime regs, anticipates DOL will receive thousands of comments on the rule — and it will be required to read every one of them. That process alone could take eight to 10 months, according to McCutchen's estimate.

Compliance also would take some time, given the need for employers to audit both salary levels and job classifications. Experts who spoke with HR Dive in recent weeks said they believe there's a strong chance employers will have workers on their payroll who make more than the current threshold, but whose jobs are incorrectly categorized as exempt under the FLSA's duties tests (to which DOL does not plan to make changes). Reclassifying employees as exempt isn't just a game of numbers; HR likely will need to communicate to employees why changes are occurring and why those changes don't necessarily reflect a worker's value to the employer, McCutchen said Tuesday.

Employers also have been advised to submit comments by the May 21 deadline. If there's a point that HR wants to make to DOL — for example, needing more time to implement certain changes to the payroll — this is the time to do it, McCutchen said.