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Labor Department Finalizes Overtime Rule

Despite significant concerns raised by n4a and other employers and associations, the U.S. Department of Labor recently finalized regulations to more than double the salary threshold under which “white collar” salaried employees must be paid overtime. 

The new rule will create challenges for many AAAs and providers, so we urge our members to prepare and plan for the change, effective this December.

As part of the Obama Administration's efforts to increase worker pay, the proposed rules were released last summer and made available for public comment and input. In short, the rules apply to “white collar” workers and dramatically raise the current salary threshold for exempt workers ($23,660), which has not been raised since the Bush Administration made updates in 2004. According to the Economic Policy Institute, the number of salaried workers guaranteed overtime has dropped from 5.5 million in 2005 to 3.5 million in 2014. The rule will not affect hourly or other non-exempt workers, who already are eligible for overtime pay. 

In September 2015, n4a submitted comments to the Labor Department (DOL) on the proposed regulatory changes to the Fair Labor Standards Act. Read our letter. We highlighted that a majority of our members indicated that the changes would create disruption and hardships in three major areas: budget, administrative burden and effect on mission-driven services. n4a requested that DOL reconsider elements of the proposed rule, including DOL's use of one specific salary threshold for all regions of the country and the automatic increases built into the new formula.

Last week, DOL issued its final rule. While modifications were made to the initial rule in response to public comment, those changes do not fully address the issues raised by n4a on behalf of its member agencies. Specifically, the annual salary threshold was lowered from the first-proposed $50,440 to $47,476 but that level applies nationwide and does not take into consideration regional wage differences. The salary threshold will also be increased every three years beginning in January 2020.

According to the DOL: “The final rule updates the salary threshold under which most white collar workers are entitled to overtime to equal the 40th percentile of weekly earnings of full-time salaried workers in the lowest wage Census region, currently the South. The final rule raises the salary threshold from $455 a week ($23,660 for a full-year worker) to $913 a week ($47,476 for a full-year worker) effective December 1, 2016.”

To comply with the rule, which is effective December 1, 2016, AAAs and other employers may need to consider boosting the salaries of staff close to the new threshold, paying overtime or otherwise adjusting workloads to prevent or mitigate the need to pay overtime.
 
In an interesting exception to this rule, providers of Medicaid-funded services for individuals with intellectual or developmental disabilities, if provided in residential homes or facilities with 15 or fewer beds, would enjoy a time-limited non-enforcement policy until March 2019.
 
For more information:
Overtime Rule Fact Sheet Specifically for Nonprofit Organizations (DOL)
Final Rule and Related Guidance (DOL)
Tips to Prepare for the Rule Implementation (American Association of Association Executives)
Exception for ID/DD Medicaid Providers (DOL)


 

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