On March 7, 2019, the Department of Labor announced a Notice of Proposed Rulemaking on overtime pay.

The Fair Labor Standards Act requires employers to pay employees time-and-a-half for the hours they work over 40 hours in a week. However, salaried employees who have a managerial role and earn a weekly salary above a salary set by the Department of Labor are exempt from this rule. The salary level currently is set at $455 per week or $23,660 annually.

The new proposed rule that the Department of Labor just released increases the salary level to $679 per week or $35,308 annually.

This proposed rule is very different from the rule proposed by the Department of Labor under President Barack Obama.

In fact, President Obama’s Department of Labor initially tried to more than double the salary level to $913 per week ($47,476 annually) in its May 2016 proposed rule. In addition, the salary level would have automatically increased every three years. This rule likely would have impacted over 4 million workers. It was set to take effect on December 1, 2016.

However, states and business groups sued in the U.S. District Court for the Eastern District of Texas. On November 22, 2016, Judge Amos Mazzant granted a preliminary injunction, and this ruling was appealed to the Fifth Circuit. While the Fifth Circuit was deciding on the injunction, Judge Mazzant granted the plaintiffs a summary judgment on August 31, 2017. He ruled that the Department of Labor exceeded its authority. On September 5, 2017, the Department of Labor under President Donald Trump dismissed the Fifth Circuit appeal and ended the litigation.

Since then, the Department of Labor has issued a Request for Information and held six public in-person listening sessions around the country in order to hear from the public.

The feedback the Department of Labor received was that President Obama’s proposed rule would increase costs for consumers and businesses and hurt workers. The Department of Labor, therefore, set a lower salary level.

As a result of the lower salary, the Department of Labor estimates an annualized cost savings of $224 million with 7% discounting if the proposed rule is implemented, rather than President Obama’s rule. The net present value of the savings is $3.2 billion using a perpetual time horizon and a 7% discount rate. In addition, the Department estimates that the proposed rule would save about $138.2 million in litigation costs per year by preventing about 211 FLSA lawsuits per year.

Because this rule proposes a new salary level that is in line with inflation and is not as costly as President Obama’s rule, Americans for Tax Reform and the Center for Worker Freedom support the proposed rule.