In May, the White House announced the publication of its final overtime rule, which the administration says will extend overtime eligibility to more than four million additional workers within the first year of implementation.
The rule, which will be effective December 1, significantly increases the minimum salary level for “white collar” employees to qualify as exempt from overtime pay requirements. Under the new rule, no employee who has a guaranteed salary of less than $47,476 will qualify as exempt under the executive, administrative or professional exemptions. That’s more than double the current minimum salary level of $23,660 and only slightly lower than the Department of Labor’s (DOL’s) originally proposed $50,440. The rule will not affect hourly or other nonexempt workers, who are already eligible for overtime pay.
Additionally, the final rule includes a mechanism for automatically updating the salary threshold every three years (a change from the proposal of yearly adjustments). The next automatic update to the salary threshold will be on Jan. 1, 2020, and the new salary level will be announced 150 days before it takes effect. The minimum salary level is set based on the 40th percentile of wages of full-time salaried employees in the lowest-wage census region (currently, the South).
During the rulemaking process, TSCPA urged the DOL to modify its proposal to account for regional and local differences in pay and to accommodate the current use of technology and flexible work schedules. You can see the letter TSCPA sent to the DOL last September here:
Unfortunately, the administration did not make those accommodations to its final rule.
TSCPA continues to believe that the new rule will adversely affect many CPAs, small businesses, nonprofit organizations and other employers with limited revenues. We continue to stress that the salary threshold is set too high, that the minimum salary level for exempt employees should instead be keyed to government data on regional cost-of-living differences, that the timing of the automatic increases fails to provide enough time for small business employers to plan for personnel costs in their budgets and that the administration should take into account the limitations of many small businesses in setting the minimum salary threshold.
A bill introduced July 17 by Rep. Kurt Schrader (D-OR) would incrementally phase in the new salary threshold over the next three years to give businesses adequate time to adjust to the new standard while ensuring workers are fairly compensated. The bill would also eliminate the provision that allows for automatic updates to the salary threshold every three years.
This bill is widely viewed as a reasonable compromise that can win bipartisan support and TSCPA is advocating that Congress pass it. We recently sent a letter of support to all the Texas House members encouraging their support. You can see the letter here:
We encourage TSCPA members to convey their own feelings on this matter to their elected representatives in Congress. We will continue to monitor this issue closely for our members. Hopefully, we will see some action on this bill when Congress returns after the summer recess.