Government Proposes to Raise Overtime Threshold

Posted by Tom Jones on Mar 11, 2019 8:00:00 AM

The long-running saga of federal rules governing overtime pay took another twist last week when the U.S. Department of Labor (DOL) announced that it will increase the overtime-wage threshold to $35,308 per year from the current $23,660 per year.

The change would mean that workers who make less than $35,000 a year would be considered non-exempt and eligible for overtime pay no matter what their current classification. So, employers with exempt employees earning between $23,660 and $35,308 would need to reclassify them as non-exempt and pay them overtime if warranted or pay them at least $35,308 per year and provide them with sufficient duties to justify classifying them as exempt.

There are no proposed changes in the federal regulations to the white-collar duties test.

If adopted, the higher wage level will significantly increase the number of workers eligible for overtime pay. It does not appear as though the proposal will include any specific duty adjustments, but it remains possible. As part of the rule-making process, the DOL sent the proposal to the White House Office of Management and Budget in mid-January.

There is no clear timetable for when the draft regulation will be released or when it will take effect. Moreover, many groups on both sides of the issue are already talking about possible legal challenges, a process that could delay implementation by months or years.

It has been more than 15 years since the government changed the overtime rules.

Employers should remember in the meantime that paying an employee a salary does not make the employee exempt. Classification is nearly always about the duties.

Any employer questioning if one or more of its employees is currently misclassified or should be reclassified, needs to take the time to review the employee’s current duties to see if they meet the law’s requirements. While there is some degree of nuance in interpretation in deciding whether an employee is exempt, an employer needs to be able to justify its classification if challenged.

DOL has detailed information on its Web site.

If you have any questions about this or any other HR matter, please contact the AIM  Employer Hotline at 1-800-470-6277.

Topics: Employment Law, Overtime, Fair Labor Standards Act

Judge Puts Hold on New Overtime Regulations

Posted by Russ Sullivan on Nov 23, 2016 10:17:01 AM

Yesterday, a federal judge in Texas imposed an injunction effectively blocking changes to federal overtime laws that were to take effect on December 1.  The decision affects employers in all states, including Massachusetts.  In deciding the case, U.S. District Judge Amos Mazzant of the Eastern District of Texas ruled that the Department of Labor regulations exceeded its authority.  As a result, once again employers who scrambled to meet the new regulatory requirements find themselves in the difficult position of either undoing the changes they have made to comply or leaving those changes in place, as well as the associated costs.

The Fair Labor Standards Act (FLSA) establishes overtime rules and the standards by which employees may be exempted from them.  Exemption requires that employees perform certain duties and be paid at a certain threshold level.  Although the FLSA does not specify that employees must be paid at a certain threshold, regulations issued by the Department of Labor in 1940 and updated numerous times since then have set a minimum salary threshold as one of the requirements for exemption from overtime.  The salary threshold was most recently updated in 2004 to $455.00 per week, or $23,660 per year.

The Department of Labor’s new regulations, issued in May and scheduled to take effect on December 1, would more than double the threshold to $913.00 per week, or $47,476.00.  In his ruling Judge Mazzant stated the increase of this magnitude would “supplant” the duties test, adding that responsibility belonging to Congress, not the DOL.

The eleventh hour ruling means that many employers who have already implemented changes to employee’s pay and timekeeping procedures now have to decide if they want to roll back those change or just forge ahead.  Unfortunately, many employers have already communicated these pay and procedural changes.  For these employees, it will be difficult to take advantage of the injunction and delay any changes until a final ruling is made.

Unknown at this time is whether the DOL will appeal the ruling.  Ultimately, the court process may drag on while the new Congress takes action to undo the regulations.  Employers may want to communicate to employees the current uncertainty and that they will be monitoring developments.  In the meantime, employers who have not implemented or communicated changes should sit and wait.  Those who have implemented or communicated changes should assess the business and employee relations impact of undoing these changes and determine whether they will proceed as planned or return to prior practices.+++

Topics: Employment Law, Overtime

New Overtime Rules a Triple Threat in Massachusetts

Posted by Christopher Geehern on Mar 12, 2014 11:01:00 AM

Massachusetts employers already under siege from federal health reform, proposed mandated sick time and campaigns to raise the minimum wage now have another front to monitor as the Obama Administration prepares to make millions of additional workers eligible for overtime.

Overtime RulesThe New York Times and other media outlets are reporting today that the president will direct the Labor Department on Thursday to change the classification rules and wage thresholds that determine overtime eligibility for many employees currently classified as executive or professional. White House officials say the new rules will require overtime pay for millions of currently exempt fast-food managers, loan officers, computer technicians and others whose responsibilities include both supervision and direct work.

The changes have significant implications in Massachusetts, where treble damages are mandated for violations of wage and hour laws.

“The stakes for Massachusetts employers could not be higher,” said John Regan, Executive Vice President of Government Affairs.

“Employers attempting to understand new overtime rules face the threat of punitive treble damages for honest mistakes or good-faith compensation disputes. This is exactly the sort of scenario that should prompt legislators to limit the 2008 treble damages law to willful violations.”

President Obama would expand overtime eligibility administratively under the federal Fair Labor Standards Act. The expansion would be accomplished in two ways, according to media reports:

  • The administration would increase the $455 per week threshold below which employers may not deny time-and-a-half overtime to a salaried worker. White House officials did not specify the new threshold level, but the Times notes that the former Chief Economic Policy Advisor to Vice President Joseph Biden co-authored a report last year that recommended raising the amount to $984 per week.
  • The administration would also tighten the rules under which employers define which workers are exempt from overtime pay based upon the type of work they perform. The new rules could require that employees perform a minimum percentage of “executive” work before they can be exempted from qualifying for overtime pay. “Under current rules, it literally means that you can spend 95 percent of the time sweeping floors and stocking shelves, and if you’re responsible for supervising people 5 percent of the time, you can then be considered executive and be exempt,” Ross Eisenbrey, a vice president of the Economic Policy Institute, a liberal research organization in Washington, told the Times.

Robert A. Fisher, a partner at the law firm of Foley Hoag in Boston and Chair of the AIM Human Resources and Employment Law Committee, said expanding overtime eligibility will not increase the take-home pay of hard working managers and supervisors.

“Suppose a manager makes $52,000 a year, $1,000 per week, and works an average of 50 hours per week,” Fisher said.

“An employer could just going to transform the individual’s pay into an hourly rate that with overtime mirrors $52,000, about $18 an hour.  It does not mean that the manager will take home more pay.  Alternatively, an employer could utilize more than one manager to avoid overtime.  The company could employ two managers at 25 hours per week, without benefits, at $20 an hour.”

The proposed overtime rule change represents the latest salvo in a broad campaign by the Obama Administration in Washington and the Patrick Administration in Boston to address what officials say is a growing income disparity facing American workers.  The White House and congressional Democrats are seeking a federal minimum wage increase from $7.25 to $10.10 per hour while the Massachusetts Senate recently approved a bill increasing the state minimum wage from $8 to $11 per hour over three years.

AIM and employer groups around the country expect to mount aggressive opposition to the overtime rule changes. The president’s proposals will be subject to public comment before they can be approved by the Labor Department, and AIM expects to seek comments from members during the process.

There are other Massachusetts connections to the issue as well. David Weil, a professor at the Boston University School of Management, has been nominated to lead the Labor Department’s Wage and Hour Administration, which would be responsible for implementing the overtime rule changes. Weil is awaiting confirmation for the post, which has been vacant since Obama took office.

Topics: Employment Law, Human Resources, Overtime, Fair Labor Standards Act

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