New overtime proposal scales back blocked Obama-era rule

A new proposed rule on overtime pay could cause problems for credit unions – particularly those on the smaller end of the asset spectrum.

A Department of Labor proposal would raise the threshold under which overtime pay is required for more than 40 hours in a week from under $24,000 per year to just over $35,000. The end result would be an estimated 1.1 million workers who are eligible for overtime.

This proposal follows a 2015 rule from the Obama administration that would have roughly doubled the salary threshold for overtime, impacting about 4 million workers. That rule was opposed by credit union trade groups who said at the time that raising the threshold could, among other things, adversely impact small CUs by increasing the compliance burden and limit growth opportunities for employees. The rule was scheduled to go into effect in December 2016 but was blocked by a federal judge – an Obama appointee – at the last minute.

Many credit union groups haven’t yet made an in-depth study of the new rule, but Carrie Hunt, EVP and general counsel at the National Association of Federally-Insured Credit Unions, said the trade group plans to query its member credit unions on how they would be impacted.

“It certainly does give some relief on the operational side [when compared with the Obama-era proposal] but that doesn’t mean there isn’t necessarily going to be any impact,” she told Credit Union Journal on Friday.

The previous rule, she recalled, alarmed CUs because “there was a concern that it wasn’t the right threshold and there wasn’t necessarily enough time to prepare for that rule change.” In part, she noted, some CUs could have had mortgage loan originators who fell under that rubric, “so there was potentially a big operational impact.”

The new rule is scheduled to take effect in 2020, which Hunt said is “not ideal,” since institutions have to budget for changes, but there are also positive aspects of it, she noted. “The original rule had automatic period increases of the salary threshold, and now the Department of Labor is requesting comment as to how [they] could update those requirements every four years, so at least there’s an opportunity to have a look at some of those impacts.”

Representatives from the Credit Union National Association and National Association of State Credit Union Supervisors did not provide comment in time for deadline on this story.