?The anticipated proposed rule on overtime has been in a holding pattern while Congress considers leadership nominations to the U.S. Department of Labor (DOL), said Robert Boonin, an attorney with Dykema in Ann Arbor, Mich., at the SHRM Annual Conference & Expo 2023 in Las Vegas.
Speaking June 12 at a concurrent session called “Wage & Hour Compliance: A DOL Update and Ways to Avoid Common Overtime Liability Landmines,” Boonin said the nomination of Julie Su to be secretary of labor for the U.S. Department of Labor has met some headwinds on Capitol Hill, and she may not be confirmed by the Senate. He added that a final rule on independent contractors may not be issued until October.
Anticipated Proposed Overtime Rule
In addition to discussing the delay caused by the held-up nomination, Boonin said he thought the DOL may be planning more aggressive changes with the new rule than in its previous revisions, which raised the salary level test to $35,568 annually.
Perhaps the department is contemplating including some provisions in the proposed rule other than a one-time increase in the salary level test, such as taking the controversial step of adding periodic indexed adjustments to the salary level rather than going through rulemaking to raise the salary level. It might also change the duties test, he said.
Even though the proposed rule hasn’t come out yet, legal challenges are expected.
Some challenges to the rule changes might be brought under the major questions doctrine, Boonin said. Millions of people potentially losing exempt status could be a so-called major question inviting courts’ scrutiny.
Boonin added that courts might question what gives the DOL the authority to set a salary level threshold to be exempt.
If the rule withstands courts’ scrutiny once issued and finalized, exempt employees reclassified as nonexempt and eligible for overtime won’t necessarily make more money, he added. Employers might reduce reclassified workers’ hours to 40 hours per workweek and require employees to not work beyond these hours unless authorized. If employees defy these restrictions, they will have to be paid overtime but may be disciplined.
Expected Independent Contractor Final Rule
Su’s nomination is “shaky,” Boonin said, partly because she was a proponent of California’s so-called ABC independent contractor standard when she was the state’s labor secretary.
While Su has said at a Senate confirmation hearing that she wouldn’t institute an ABC rule nationwide, Boonin said the independent contractor rule that the DOL has proposed “is the ABC test in sheep’s clothing.”
What Is the ABC Test?
Under the ABC test, the following factors must be met for a worker to be properly classified as an independent contractor:
- The worker is free from the control and direction of the hiring entity in connection with the performance of the work (Absence of control).
- The worker performs tasks that are outside the usual course of the hiring entity’s business (Business of the worker).
- The worker is customarily engaged in an independently established trade, occupation or business of the same nature as the work performed for the hiring entity (Customarily engaged).
Under the ABC test, a worker is presumed to be an employee unless a hiring entity can show all three factors.
Even if Su isn’t confirmed, she likely will continue to serve as assistant secretary of labor, Boonin said.
He added that Jessica Looman, the nominee for DOL’s Wage and Hour administrator, is less controversial and there is a good chance she will be confirmed soon.
Boonin called the independent contractor proposed rule that was issued last year “scary” and said often final rules don’t differ much from proposed rules.
If the final independent contractor rule is similar to the proposed rule, employers probably will no longer be able to classify most workers as independent contractors, Boonin said. Instead, the workers will have to be treated as employees and thus will be subject to wage and hour laws and applicable overtime requirements.