Two Obama-era initiatives are once again in the spotlight: the criteria for overtime eligibility and the collection of pay information on EEO-1 forms. Employers should be aware of the following developments in these key areas:
Overtime Eligibility
In 2016, the Obama administration issued a revised rule, which changed the criteria for overtime exemption by significantly increasing the salary threshold. The rule never went into effect as a result of a court challenge. On March 7, 2019, the current administration announced a new proposed rule addressing overtime exemption. As a result, the criteria for overtime exemption is now front and center once again.
Under existing regulations, to qualify for the “white collar” exemptions to the federal Fair Labor Standards Act, an employee must have job duties that meet certain criteria and must also be paid a salary that falls above a specified threshold. The current minimum salary threshold, which has been in effect since 2004, is $455 per week (or $23,660 per year). Accordingly, employees earning less than $455 per week are automatically eligible for overtime.
The proposed rule would allow more employees to qualify for overtime, but differs from the Obama-era rule in several respects:
- The minimum salary threshold will increase to $679 per week (or $35,308 per year). This is less generous than the Obama administration’s rule, which would have made employees earning less than $913 per week ($47,476 per year) eligible for overtime.
- There will be notice-and-comment periods every four years to determine future increases. The Obama-era rule had instead allowed for automatic increases to the salary threshold periodically.
- The minimum annual salary for highly compensated employees – who need to meet a less stringent duties test – will increase from $100,000 to $147,414. This is higher than the Obama-era rule, which would have increased the minimum annual salary to $134,004.
If the proposed rule goes into effect, employers will need to reclassify employees who are currently exempt, but earning less than $679 per week, or raise their salaries to the new minimum. Highly compensated employees, who are ineligible for overtime only under the relaxed duties test, will need to earn at least $147,414 annually to remain exempt.
The U.S. Department of Labor (DOL) estimates that the final rule will take effect in January 2020, but it is unclear if this timeframe is realistic because of anticipated legal challenges. The DOL will be accepting comments on the proposed rule.
EEO-1 Pay Reporting By Gender, Race, and Ethnicity
Under the Obama administration, the U.S. Equal Employment Opportunity Commission (EEOC) adopted new requirements for EEO-1 reporting, mandating that employers report pay data by gender, race, and ethnicity. The requirements were put on hold by the current administration—but now appear to be back on track. On March 4, 2019, a federal district court judge ruled that the administration had an insufficient basis to stay the data collection.
Some employee rights advocates see the reporting requirement as an important tool in combatting pay disparities, especially those based on gender. Employers’ groups have argued that the requirement is cumbersome and that the aggregated data will shed little light on pay differences based on protected characteristics.
The next steps will depend on developments in the legal proceeding – the administration is expected to appeal the judge’s ruling – and on guidance from the EEOC. The EEOC has yet to announce how it will implement the court’s ruling and whether the EEO-1 reporting, now due on May 31, 2019, will include pay data. Private employers with more than 100 employees are required to complete the EEO-1 forms, which collect information by job category.
Prince Lobel will provide updated alerts on future developments in these two areas. In the meantime, if you have questions about any of the information here, or would like to know more about how these changes will affect employers, please contact Laurie Rubin, the author of this alert, at 617.456.8020 or [email protected] or Daniel Tarlow, the chair of our Employment Law Practice Group, at 617.456.8013 or [email protected].