The Department of Labor (DOL) has submitted its final rules on overtime pay regulations to the Office of Information and Regulatory Affairs (OIRA) for review.  Because the proposed modifications to the FLSA’s overtime pay exemptions are expected to have a significant impact on some local governments, ICMA and many other state and local government associations have pressed for modifications. 

In August, ICMA submitted comments to the DOL when the proposed regulations were first published. ICMA urged the agency to phase in changes over time and to address regional differences and challenges for smaller and rural communities. A majority of the members of the Governmental Affairs and Policy Committee reported that the proposed standard salary level was not reasonable for their community.

If no changes are made in the regulations that were proposed last summer, the new rules would:

1. Set the standard salary level at the 40th percentile of weekly earnings for full-time salaried workers ($921 per week, or $47,892 annually).
2. Increase the total annual compensation requirement needed to exempt highly compensated employees (HCEs) to the annualized value of the 90th percentile of weekly earnings of full-time salaried workers ($122,148 annually).
3. Establish a mechanism for automatically updating the salary and compensation levels going forward to ensure that they will continue to provide a useful and effective test for exemption.

Local governments with concerns can reach out to OIRA before the final regulations are issued by contacting OIRA_submission@omb.eop.gov. The name of the proposed DOL rule is "Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales, and Computer Employees."

Members of Congress have introduced related legislation, Partnership to Protect Workplace Opportunity (PPWO) S. 2707 and H.R. 4773, the Protecting Workplace Advancement and Opportunity Act. These bills would require DOL to conduct a deeper economic analysis on the impact these changes would have on public entities before moving forward with its proposed overtime rule.

Regardless of any modifications that DOL may make, local governments need to prepare. The timeframe to implement the new regulations could be short – as few as 30 days.