Removing Barriers Blog

DOL Overtime Final Rule Provides Minor Relief, But Concerns Remain
Posted May 18, 2016 by Chandler Schuette

Today the Department of Labor (DOL) released the anticipated rule governing which executive, administrative, and professional employees (white collar workers) are entitled to the Fair Labor Standards Act’s minimum wage and overtime pay protections. The DOL made some of the changes that we urged them to make in our comment letter, which we appreciate. However, we still believe the rule as finalized will create regulatory burdens for credit unions, particularly smaller credit unions and those in rural and underserved areas. 

The changes that were made at CUNA’s request include: 

Salary Level

The proposed rule: $970 weekly (if finalized as proposed) 40th percentile of full-time salaried workers nationally.  

The final rule: $913 weekly 40th percentile of full-time salaried workers in the lowest-wage Census region (currently the South) 

What we suggested to the DOL:  

“CUNA has several concerns about the changes to raise the salary threshold from $455 a week ($23,660 a year) to a projected level of $970 a week ($50,440 a year) in 2016 and to establish a mechanism for automatically updating the minimum salary and compensation levels.” 

  • “Credit union employee salaries vary greatly depending on their asset size, the region of the country they are located in, the number of employees, the number of services offered, the number of members, and the number of branches. Setting one salary threshold for the entire country overlooks the fact that the cost of living throughout the country varies, and salaries in different regions vary to reflect that.” 

  • “CUNA asks that the DOL consider these distinctions and reevaluate its proposed salary threshold for overtime, which arguably is not appropriate for credit union employees in general, but may be particularly inappropriate for small credit unions and those in rural and underserved areas.” 

Automatic Adjusting

The proposed rule: Automatically updating the salary level at the 40th, or any, fixed percentile range every year, and only giving 60 days-notice each year of the new threshold.  

The final rule: Automatically updating the salary level every 3 years, maintaining the standard salary level at the 40th percentile of full-time salaried workers in the lowest-wage Census region, and the HCE total annual compensation level at the 90th percentile of full-time salaried workers nationally. 

What we  suggested to the DOL:  

“CUNA opposes automatically updating the salary level at the 40th, or any, fixed percentile range.”  

  • “In general, we believe the changing economy should be revaluated each year in a more analytical way than merely looking at a fixed percentile of the entire country to determine a threshold. An arbitrary threshold could be extremely problematic if it does not account for all of the other factors that contribute to changes to the economy and workforce each year. Furthermore, as previously noted, we believe any threshold must include a further analysis that examines the impact on rural and underserved areas, and small businesses.” 

  • “Finally, we are concerned that employers will have inadequate notice about what the new threshold is each year if the salary level is automatically updated. The proposal states that the new threshold would be published annually giving the public 60 days-notice. This short time frame would be very difficult for credit unions to comply with, and would likely not provide enough notice to make appropriate changes.” 

Standard Duties Test

The proposed rule: In the proposed rule, the DOL stated it was considering whether revisions to the duties tests are necessary in order to ensure these tests fully reflect the purpose of the exemption. However, the proposed rule includes no information about what changes the DOL is considering. 

The final rule: No changes to the standard duties test. 

What we suggested to the DOL 

“In the absence of providing specific information for the public to consider and comment on, the DOL should not make any unilateral changes to the duties test.” 

We wrote to both the DOL and NCUA to seek relief for credit unions who we believe are disproportionately impacted by this rule. We've also shared our concerns with the Small Business Administration’s Office of Advocacy. Additionally, we supported legislation and sent letters to Congress seeking reforms to this rule. We are aware that today’s final rule will sweep in a large number of credit union employees that previously did not fall within the threshold to receive overtime pay. We are currently fully analyzing the final rule and encourage credit unions to consult with employment attorneys to determine how to best comply. Compliance is required by December 1, 2016.