DOL Publishes Final Rule on Overtime Pay: Significant Impact on Counties

On May 18, Vice President Joe Biden, Secretary of Labor Thomas Perez and Sen. Sherrod Brown (D-Ohio) announced the U.S. Department of Labor’s (DOL) final rule on overtime pay. The rule amends regulations under the Fair Labor Standards Act (FLSA) governing the “white collar” exemption from overtime pay for executive, administrative and professional employees. The Final Rule focuses primarily on updating the salary and compensation levels needed for executive, administrative and professional workers to be exempt from overtime requirements. Specifically, it sets the standard salary level at the 40th percentile of earnings for full-time salaried workers, which is $913 per week or $47,476 annually, starting December 1, 2016. Previously, the threshold was $23,660.

Additionally, the new rule establishes a mechanism for automatically updating the salary and compensation level every three years, beginning January 2020, to prevent levels from becoming outdated. The Final Rule does not change any of the existing job duty requirements, or duties test, to qualify for exemption. The rule would affect an estimated 4.2 million workers across the United States who are currently exempt from overtime requirements.

While NACo supports the goal of providing solid wages and benefits for employees, we are concerned that the rule does not account for economic and administrative diversity in counties across the country and could lead to unintended consequences for counties and the very employees that the rule intends to help. While the $47,476 salary threshold is lower than the originally proposed salary threshold of $50,440, it is still a substantial increase that will be implemented over a one-year period and could present serious budgetary and administrative challenges to county governments.

County governments are a major employer and economic engine for workers across the U.S. Today, America’s 3,069 county governments employ more than 3.3 million people, providing services to over 305 million county residents. Counties provide health benefits to nearly 2.5 million employees and nearly 2.4 million of their dependents, spending an estimated $20 to $24 billion annually for health insurance premiums alone. In addition, counties are responsible for numerous public services that could face major ramifications as a result of DOL’s final rule. These services include, transportation and infrastructure, justice and public safety, public health, search and emergency rescue, 911 operations, fire prevention, and much more. The Final Rule could compromise the ability of county governments to provide these critical services—especially during disaster or crisis events.

Furthermore, according to NACo’s 2015 County Economic Tracker report, only 214 county economies have fully recovered (based on four indicators—job growth, unemployment rates, economic output (GDP) and median home prices) to their pre-recession levels. DOL’s final rule could make counties’ recovery efforts more difficult. It is also important to keep in mind that most counties must operate on a balanced budget and are prohibited by state law from raising additional funds through taxation. Because of this, counties could face serious challenges in meeting the requirements of DOL’s new rule.

While NACo supports the overall goal of the new regulation, we remain concerned over the lack of local government consultation and analysis conducted by DOL on a rule that could have significant and negative impacts on local governments and their residents. NACo is preparing and will publish a detailed analysis of the Labor Department’s action over the next several weeks.

DOL will be holding a special webinar about the impacts of the final rule on state and local governments on June 8 from 1:00 PM—2:30 PM EST. NACo urges members to participate in this important webinar. To register, click here.

2016-12-21T20:11:18+00:00 May 27th, 2016|Categories: Community & Economic Development|Tags: , , |