Tag Archives: overtime

DOL Issues Notice Of Proposed Rule to Increase Overtime Threshold

The U.S. Department of Labor (Department) announced a Notice of Proposed Rulemaking (NPRM) that, if passed,  would make more than a million more American workers eligible for overtime. The NPRM would increase the minimum salary threshold to qualify for the Executive, Administrative and Professional Exemptions, often referred to as the “white collar exemptions”.

Under the current law, employees with a salary below $455 per week ($23,660 annually) must be paid overtime if they work more than 40 hours per week. This salary level was set in 2004.

This new proposal would update the salary threshold using current wage data, projected to January 1, 2020. The result would boost the standard salary level from $455 to $679 per week (equivalent to $35,308 per year).  The NPRM does not call for automatic adjustments to the salary threshold.

Importantly, the NPRM is not yet law.  Once the rule is published in the Federal Register the public will be able to submit comments for 60 days.  But, given that this increase is approximately $12,000 less than the Obama DOL’s proposed increase enjoined by the U.S. District Court for the Eastern District of Texas in November 2016, it likely has a very strong chance of becoming law.

Employers should prepare accordingly by auditing  exempt positions to ensure that the “duties test” is met.  Remember, if the duties test is not met it does not matter what amount of salary is paid.  Employers should also assess whether an increase to the employee’s salary in order to maintain the exemption is feasible, or if the better business approach is to reclassify the employee as nonexempt and pay overtime when it is required.

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The New DOL Overtime Rules Are Here: What You Need to Know

After much anticipation ( and likely some dread from employers) the DOL released its new overtime rules last night.  The Final Rule makes changes to the salary test for the Executive, Administrative and Professional (EAP) Exemptions as well as the Highly Compensated Employee Exemption.

* Key Provisions of the Final Rule *

The Final Rule focuses primarily on updating the salary and compensation levels needed for EAP workers to be exempt. Specifically, the Final Rule:

  1. Sets the standard salary level at the 40th percentile of earnings of full-time salaried workers in the lowest-wage Census Region, currently the South, which is $913 per week or $47,476 annually for a full-year worker;
  2. Sets the total annual compensation requirement for highly compensated employees (HCE) subject to a minimal duties test to the annual equivalent of the 90th percentile of full-time salaried workers nationally, which is $134,004; and
  3. Establishes a mechanism for automatically updating the salary and compensation levels every three years to maintain the levels at the above percentiles and to ensure that they continue to provide useful and effective tests for exemption.
  4.  Amends the salary basis test to allow employers to use nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the new standard salary level.  A “catch up” payment can also be made in an effort to satisfy the new salary level, provided it does not exceed 10 percent of the new minimum salary. However, HCE employees must still receive at least the full standard salary amount each pay period on a salary or fee basis without regard to the payment of nondiscretionary bonuses and incentive payments.
  5. The Effective Date is December 1, 2016.

Significantly, the Final Rule made no changes to the current duties tests for these exemptions.

Employers  have almost 6 months to prepare before these changes become law.  Use that time wisely to consult with employment law counsel, audit your employees currently classified as exempt and analyze your business to determine the best way to respond .

 

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Comp Time for Private Employers?

Recently the U.S. House of Representatives passed the Working Families Flexibility Act which would allow employers to offer compensatory time off ( comp time) in lieu of overtime.   Under the bill  comp time would be offered at a rate of 1.5 hours per hour of overtime worked and the employee and employer would have to agree in writing to the comp time arrangement.  To be eligible an employee would have to work a minimum of 1,000 hours within the preceding 12 months.

Employees could accrue up to 160 hours of comp time a year and would be permitted to use their comp time upon request within a reasonable time, so long as the usage would not unduly disrupt the employer’s operations.  Any unused comp time could be cashed out at the end of each year.

This bill faces strong opposition from labor unions, congressional Democrats and the White House.  As a result, comp time is unlikely to be an option for private employers in the near future.  Private employers must continue to pay overtime for all time worked in excess of 40 hours in a work week in order to comply with the FLSA.

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