Trump Administration Nears Release of New Overtime Proposal

The Wall Street Journal
By Eric Morath
Jan.10, 2019

WASHINGTON—The Labor Department sent its proposed overtime rule to the White House for review, which could allow the regulation determining how many Americans are entitled to extra pay when working more than 40 hours to be finished by late this year. The department has sent the rule to the Office of Information and Regulatory Affairs, an arm of the White House’s Office of Management and Budget, two administration officials said. That is typically a sign the regulation is close to a public unveiling.

Businesses and labor groups are carefully following developments on the rule because, depending the details, it could make millions more Americans eligible for extra pay. That potentially puts more money in workers’ pockets, but raises costs for businesses.

The Labor Department hasn’t released specifics on its proposal.

Many businesses pay overtime to hourly workers but often exempt managers and other salaried employees from additional pay when they work more than 40 hours a week. But the Labor Department sets a salary threshold, below which, in most cases, a worker must be paid time-and-half regardless of their role in the firm.

In testimony to Congress, Labor Secretary Alexander Acosta has said he was in favor of lifting the annual salary threshold from the $23,660 level set in 2004. The Labor Department, in its July 2017 request for public input on the regulation, asked whether updating the 2004 salary level for inflation would be an appropriate basis for setting the standard salary level. If that were to occur, the new annual threshold would be about $32,000.

In the final year of President Obama’s administration, the department completed a rule to raise the threshold salary to $47,476. That rule sought to adjust the level every three years. The department estimated in 2016 that the rule would have made 4.2 million more Americans eligible for overtime pay.

Many Republicans and business groups opposed the rule, and in December 2016 federal judge halted it from being implemented after states and businesses sued. That Texas judge later struck down the rule, and the Trump administration began working to rewrite it.

In its 2017 request for information, the Labor Department raised concerns that an increased salary threshold could have adverse effects on parts of the country where people earn less. It asked whether salary levels should be set by geographic region, metro areas and employer size. That raised the possibility the department would propose a menu of standards rather than a single national level.

The questions around inflation were interpreted by observers as opening the door to indexing thresholds to price changes—something that wasn’t done when the rule was last reset, during the George W. Bush administration.

Mr. Acosta has signaled sympathy to increasing the level with the cost of living.

“I think it’s unfortunate that rules involving dollar values can go more than a decade without adjusting,” he said in testimony to Congress in 2017. “Life does get more expensive.”

Sending the proposal to the White House this month could put the administration on schedule to finalize the rule late this year, said Heidi Shierholz, the former chief economist at the Labor Department. She was involved in crafting the prior administration’s policy.

However, she said, it’s likely the new rule could be challenged in court, potentially delaying any implementation.

Another wrinkle: The regulatory affairs office receiving the department’s proposal is affected by the partial government shutdown, so it’s unclear how quickly personnel there can begin working on the rule.