The Department of Labor (DOL) is in the final phase of completing a rule that would adjust when certain white collar workers can properly be considered “exempt” employees who are not entitled to overtime compensation.

Last week, in response to growing concern over the DOL proposal, Sens. Tom Scott (R-South Carolina) and Lamar Alexander (R-Tennessee), along with Reps. Tim Walberg (R-Michigan) and John Kline (R-Minnesota), introduced companion bills S. 2707 and H.R. 4773, the “Protecting Workplace Advancement and Opportunity Act.”

Currently, if an employee earns more than $23,660 annually and meets a simple duties test (for example, the employee’s primary duty is non-manual work directly related to the management or general operations of the agency), the employee falls under the “administrative exemption” and is not entitled to overtime under federal law.

The DOL proposal calls for an excessive 113% increase to the salary threshold required to qualify for this exemption, which would be tied to inflation for the future as well as potential undefined changes to the duties test. The DOL proposal is expected to broaden the overtime pay requirement to apply to millions of additional employees, resulting in extra cost for many businesses.

Imposing such a significant salary threshold increase creates challenges that are compounded by the fact that this adjustment would apply without regard to the wage, income and cost of living disparities that exist across the country. The DOL regulation would have a major impact on many independent insurance agencies and their small business clients by reducing employee flexibility, increasing overtime liability and requiring careful tracking of employee hours, as well as annual compliance audits. Furthermore, without specific information from the DOL regarding if and how they may make changes to the duties test, it is not possible to currently assess all potential ramifications on insurance agencies.

The recently proposed legislation would halt the current rulemaking process and stop the DOL from re-proposing the rule unless certain conditions are met. These conditions include: 1) forbidding the DOL from issuing any automatic salary threshold update for inflation; 2) clarifying that the duties test cannot be revised without a specific proposal for revisions; and 3) requiring the DOL to conduct substantial analysis on the impact of the rule, including sector-specific and small business-specific impact analysis.

The Big “I” supports the legislation and will discuss it during next month’s Legislative Conference. 

Jennifer Webb is Big “I” federal government affairs counsel.