The comment period on the U.S. DOL Wage and Hour Division’s Notice of Proposed Rulemaking, “Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales, and Computer Employees,” closed on November 7, 2023, with interested stakeholders having uploaded over 33,000 submissions. Now the Department will need to read and respond in preparing its final rule.
Seyfarth gladly seized the opportunity to share its thoughts on the proposed rule with the Department, submitting a comment informed by its extensive wage-hour practice and its interactions with clients, associations, and other contacts across a broad range of industries. The Firm’s submission, “intend[ed] to lend a measured and productive voice to this important process,” speaks to a number of concerns encapsulated in the proposed rule, including:
- Negative ramifications of the proposed EAP and HCE exception salary thresholds, such as exceeding the threshold’s traditional “gatekeeper” function; disproportionally impacting certain areas and industries; causing wage compression; harming part-time employees; and infringing on worker flexibility.
- Unjustified limitations on the amount and type of compensation that can be credited toward the salary thresholds, as well as the unnecessarily-short window to correct underpayments.
- Unprecedented automatic increases to the salary thresholds based on improper indexing;
- Problems with the Department’s methodology and assumptions; and
- The failure to satisfy DOL’s goals, like reducing employee turnover and increasing work-life balance.
Seyfarth also explains employers will need more time to implement such drastic changes. The proposed effective date would land 60 days after publication of the final rule, but the analytical and logistical processes required for coming into compliance are complex, particularly if performed mid-year, so may require significantly more time.
DOL declined to extend the comment period, suggesting the exemption rules have already gone through proposed and actual changes over the past several years, so everyone is familiar with the issues. The Department may use a similar argument regarding implementation, i.e., employers already know how to make these changes and, therefore, should not need significant time to comply.
Further, DOL may already have responses in mind to anticipated lines of comment, which could speed up the timeline to publish a final rule. Rulemaking schedules are made to be broken, but we can expect the Department and Division to move promptly. It would not be out of bounds to expect a final rule published in late spring or early summer 2024, with an effective date around the 2024 election.
It remains possible – likely? – that any final rule will face legal challenges. Though many employers may agree some increase in the salary thresholds is justified, steep increases could lead to litigation. As the U.S. Supreme Court considers whether to maintain its historical deference to agency regulations, while courts more frequently employ the major questions doctrine, predicting the endgame for an overtime exemption final rule remains challenging.
For more on this or any related topic, please do not hesitate to connect with the author or your favorite member of Seyfarth’s Wage and Hour Practice Group.