Administration Mulls Changes to Overtime Threshold
The Trump administration is reportedly preparing to set a new salary threshold for the white-collar exemption to overtime pay, an action last undertaken by the Obama administration before it was stopped in the courts.
Reports suggest that the new salary threshold rate will be $679 a week or ($35,308 per year). It is not clear when the dollar figure proposal will be finalized or officially published.
The US Department of Labor under President Obama announced an increase in 2016 from the current $455 ($23,660) a week salary threshold to $913 a week. A Federal court in Texas later stopped that version in its tracks. Any new threshold proposed by the Trump administration is also likely to face a court challenge.
Once the actual rules are published, employers may have to take steps to ensure compliance. One of the first steps will be to determine the number of employees making less than the new threshold wage and who are currently classified as exempt. Those employees will automatically become non-exempt unless their salary is raised above the new dollar threshold.
Other potential impacts:
- For highly compensated employees, the total annual compensation level will increase to $147,414 per year (up from the current level of $100,000 per year).
- To meet the salary level, the proposed regulations will permit employers to include non-discretionary bonuses and incentive payments, including commissions, to satisfy up to 10 percent of the salary level requirement.
- The DOL will review these levels periodically, but unlike Obama-era draft, no automatic increases are proposed as part of the 2019 version.
- Massachusetts employers will also have to be careful not to run afoul of the new Massachusetts pay equity law.
One of the most complex aspects of any change to the Fair Labor Standards Act (FLSA) white-collar exemption standard is how an employer will implement the change in the workplace. The decision to reclassify an exempt employee to non-exempt comes with its own complexities unique to every employer. Take the time to prepare for that conversation and try to anticipate as many of the questions that may arise as possible.
While the debate over this issue has focused on the wage level, employers concerned about compliance should also focus on the duties their employees perform. Misclassifications based upon the duties test, or a misreading of the duties test, is often the factor that gets an employer in trouble under the white-collar exemption law.
The FLSA and the Massachusetts wage and hour law continue to pose significant challenges for many employers. AIM HR solutions regularly offer classes and training sessions in both of these issues. Contact Beth Yohai at email@example.com