II 114th CONGRESS 2d Session S. 3464 IN THE SENATE OF THE UNITED STATES September 29, 2016 Mr. Alexander (for himself, Ms. Collins , Mr. Lankford , Mr. Scott , and Mr. Flake ) introduced the following bill; which was read the first time A BILL To provide incremental increases to the salary threshold for exemptions for executive, administrative, professional, outside sales, and computer employees under the Fair Labor Standards Act of 1938, and for other purposes.

1. Short title This Act may be cited as the Overtime Reform and Review Act . 2. Incremental increases to salary threshold (a) In general Section 13 of the Fair Labor Standards Act of 1938 ( 29 U.S.C. 213 ) is amended— (1) in subsection (a)(1), by inserting subsection (k) and after subject to ; and (2) by adding at the end the following: (k) Requirements for salary threshold (1) In general In promulgating regulations for purposes of defining and delimiting the terms defining employees exempt under subsection (a)(1), the Secretary shall require that any employee exempt under such subsection is compensated at a rate that is not less than the applicable salary threshold established under paragraph (2). (2) Incremental increases (A) Initial threshold The Secretary shall establish an applicable salary threshold, beginning on December 1, 2016, that is a rate of compensation equal to $35,984 per year, or $692 per week. (B) Subsequent increases Notwithstanding subparagraph (A) and subject to paragraph (3), the applicable salary threshold established under subparagraph (A) may be increased to a rate of compensation that is equal to— (i) beginning on December 1, 2018, $39,780 per year or $765 per week; (ii) beginning on December 1, 2019, $43,628 per year or $839 per week; (iii) beginning on December 1, 2020, $47,476 per year or $913 per week; and (iv) beginning on December 1, 2021, any rate of compensation provided by the Secretary in accordance with paragraph (4) and subsection (l). (3) Requirements for increases With respect to nonprofit organizations (including nonprofit institutions of higher education), Medicare or Medicaid dependent health care providers, and State and local governments, the increases provided in clauses (i), (ii), and (iii) of paragraph (2)(B) shall occur only if— (A) the Comptroller General of the United States conducts and submits the study under section 3 of the Overtime Reform and Review Act in accordance with that section; and (B) not later than June 1, 2018, the Comptroller General, in coordination with the Secretary and the Chief Counsel for Advocacy of the Small Business Administration, certifies that the increase in the salary threshold under paragraph (2)(A) from the salary threshold in effect prior to December 1, 2016, has not— (i) resulted in an increased rate of part-time employment; or (ii) negatively impacted workplace flexibility, benefit structures, career advancement opportunity, or job growth. (4) Salary threshold after December 1, 2021 Not prior to December 1, 2021, the Secretary may issue a rule through notice and comment rulemaking in accordance with section 553 of title 5, United States Code, to change the rate of compensation for the applicable salary threshold under paragraph (2). (5) Rule of construction Nothing in this subsection shall require the Secretary to promulgate the regulations described in this subsection in accordance with the formal rulemaking provisions of sections 556 and 557 of title 5, United States Code. . (b) Definitions Section 3 of the Fair Labor Standards Act of 1938 ( 29 U.S.C. 203 ) is amended by adding at the end the following: (z) Medicare or Medicaid dependent health care provider means an employer who derives more than 50 percent of its revenue from payments under the Medicare program established under title XVIII of the Social Security Act ( 42 U.S.C. 1395 et seq. ), a State plan under the Medicaid program under title XIX of such Act ( 42 U.S.C. 1396 et seq. ), or both. . (c) Effective date This section, and the amendments made by this section, shall take effect on December 1, 2016. 3. GAO study (a) In general Not later than March 1, 2018, the Comptroller General of the United States shall conduct, and submit in accordance with subsection (c), a study on the implementation of the salary threshold provided under section 13(k)(2)(A) of the Fair Labor Standards Act of 1938 ( 29 U.S.C. 213(k)(2)(A) ). (b) Contents The study under this section shall include each of the following: (1) The number of small entities affected by the increase in the salary threshold provided under section 13(k)(2)(A) of the Fair Labor Standards Act of 1938 compared to the salary threshold in effect prior to December 1, 2016. (2) An analysis of the impact of such increase based on regional, State, metropolitan, and nonmetropolitan salary data and cost-of-living differences. (3) The percentile of full-time salaried workers affected by such increase, including disaggregation by— (A) State; (B) industry subsector; (C) small organizations; (D) small government jurisdictions; (E) nonprofit organizations; (F) institutions of higher education as defined in section 101 of the Higher Education Act of 1965 ( 20 U.S.C. 1001 ); (G) Medicare or Medicaid dependent health care providers, as defined in section 3 of the Fair Labor Standards Act of 1938 ( 29 U.S.C. 203 ); and (H) small businesses. (4) Management and human resource costs for all employers in implementing such increase. (5) The impact of the increase on lower-wage industries, including by geographic area. (6) All nonfinancial costs associated with the increase, including the impact on employment (including rates of unemployment and part-time employment), workplace flexibility, employee benefit structures, career advancement opportunity, new business formation and termination, and loss of market share to foreign competition. (7) The impact of the increase on the number of individuals in the United States who are marginally attached or discouraged as defined by the Bureau of Labor Statistics. (c) Submission The study under this section shall be submitted to the Committee on Health, Education, Labor, and Pensions of the Senate, the Committee on Education and the Workforce of the House of Representatives, the Committee on Small Business and Entrepreneurship of the Senate, and the Committee on Small Business of the House of Representatives. 4. Enforcement of Department of Labor rule (a) In general Beginning on the date of enactment of this Act, or December 1, 2016, whichever date is earlier— (1) the rule submitted by the Department of Labor entitled Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales and Computer Employees (81 Fed. Reg. 32391 (May 23, 2016)) shall cease to have any force or effect; (2) the Secretary of Labor shall not enforce such rule based on conduct occurring before or after such date; (3) an employee shall not have any right of action against an employer for the employer's failure to comply with such rule at any time prior to or after such date; and (4) any regulations that were amended by such rule shall be restored and revived as if such rule had never taken effect. (b) Clarification Notwithstanding subsection (a), nothing in this Act shall be construed to create a right of action for an employer against an employee for the recoupment of any payments made to the employee prior to the date of enactment of this Act, or December 1, 2016, whichever date is earlier, that were in compliance with the rule described in subsection (a)(1). 5. Fair Labor Standards Act of 1938 clarification (a) Sense of the Senate It is the sense of the Senate that section 13(a)(1) of the Fair Labor Standards Act of 1938 ( 29 U.S.C. 213(a)(1) ), including as in effect on the day before the date of enactment of this Act— (1) requires the Secretary of Labor to issue a new rule through notice and comment rulemaking in accordance with section 553 of title 5, United States Code, for each specific and enumerated change to the salary threshold provided in regulations promulgated under such section 13(a)(1), proposed by the Secretary of Labor; and (2) prohibits any rule that would result in a change to the salary threshold for which a specific and enumerated rate of compensation for the salary threshold was not proposed, including any procedure that automatically updates the salary threshold. (b) FLSA amendment Section 13 of the Fair Labor Standards Act of 1938 ( 29 U.S.C. 213 ), as amended by section 2, is further amended— (1) in subsection (a)(1), by inserting in accordance with subsection (l) after regulations of the Secretary ; and (2) by adding at the end the following: (l) Requirements for updating the salary threshold (1) In general For any change to the salary threshold provided in regulations promulgated under subsection (a)(1), the Secretary shall— (A) propose a specific and enumerated rate of compensation required for an employee to be exempt under such subsection; and (B) issue a rule through notice and comment rulemaking in accordance with section 553 of title 5, United States Code. (2) Prohibition on automatic updates In accordance with paragraph (1), the Secretary may not issue any rule that would result in a change to the salary threshold provided in regulations promulgated under subsection (a)(1) based on any procedure that automatically updates the salary threshold without taking each action required under paragraph (1). .