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Department of Labor Issues Request For Information on Overtime Rule

Today, the Department of Labor (DOL) published a Request for Information seeking comment from the public regarding the regulations governing overtime exemptions. As you likely recall, the DOL revised the salary requirement in 2016 to require that exempt employees be paid a minimum of $913 per week (or $47,476 per year). This was a substantial increase from the 2004 level, which was set at $455 per week, or $23,660 per year. That regulation met with a legal challenge and was temporarily blocked by a federal court in Texas. While that litigation is still ongoing over whether the DOL has the authority to require any minimum salary requirement, the DOL has indicated its intent not to enforce the $913 per week requirement.

In light of the litigation, along with President Trump’s Executive Order requiring administrative agencies to minimize regulatory burden, the DOL has issued a Request for Information to assist it in creating updated overtime rules. The Request for Information is open until September 25, and indicates that the DOL is open to considering a large change to the overtime regulations. The Request seeks feedback on everything from the amount of the minimum salary to the duties of exempt employees to whether there should be no minimum salary requirement at all.  Specifically, the DOL requests comment on:

  1. Whether the $455 minimum level should be increased by an amount equal to inflation? If so, what is the appropriate measure of inflation?
  2. Whether the $455 minimum level should be modified to continue to exclude the lowest 20% of salaried workers in the lowest paying region, as was used in establishing the 2004 level?
  3. Alternatively, should the minimum level be set based upon a defining factor, such as employer size, geographic region, metropolitan area, or other factor?
  4. Should different minimum salary levels be set for the executive, administrative and professional exemptions rather than having one generally applicable level?
  5. How well does the salary amount match with the duties test? Does the salary level become the predominate factor? If not, at what point does the salary level no longer serve as a reliable indicator of exempt status? Would it be better to have solely a duties test? If so, what duties would accurately show exempt status?
  6. Should the standard duties test be updated? If so, with what duties?
  7. How did you respond to the 2016 revisions? Did you increase wages, decrease hours, switch to an hourly rate, lower the hourly rate to maintain the same pay level, change overtime policies, or some other method?
  8. Does it appear that certain occupations were no longer included as exempt under the higher rate? Did those occupations spend 20 – 40% of their time performing exempt functions?
  9. Was the cap at permitting no more than 10% of the minimum salary requirement to be paid by non-discretionary bonus a good level? Should it be tied to salary level?
  10. Should the minimum level be set to automatically adjust? If so, what measurement should be used? How often should it be adjusted?

This is merely the first step in the review process, but it does indicate a likelihood that revisions are forthcoming, potentially substantial. Given the political climate, any revisions would likely be more business friendly. I would not anticipate seeing any new regulations this year, but perhaps a Notice of Proposed Rulemaking and draft regulations could be out next spring.  Comments can be submitted by mail or electronically. Instructions for submitting comments are included in the Request for Information. MRR will continue to monitor the DOL for any new guidance on this subject.

Tami Hannon is a Partner in MRR’s Cleveland Office. For more info, contact her at thannon@mrrlaw.com.

Department of Labor Informal Guidance on Joint Employment and Independent Contractors Withdrawn

Employers employing independent contractors, temp workers, and other individuals potentially involved in joint employment relationships should be breathing a bit of a sigh of relief these days.  On June 7, 2017, the U.S. Department of Labor (DOL) withdrew guidance that had been in place since as early as 2015.  This guidance, developed under the Obama Administration, emphasized a broad interpretation of the Fair Labor Standards Act and supported prior efforts to crack down on employers potentially classifying employees and not complying with wage and hour laws.  Not surprisingly, this withdrawal of the guidance creates a more employer-friendly environment.

Effectively, this should not change how employers operate.  This withdrawal does not mean that employers can be lax in complying with federal wage laws.  In announcing the withdrawal, the DOL made it a point to state that it will continue to fully and fairly enforce all laws within its jurisdiction.  This withdrawal, however, potentially signals that the Trump Administration will be focusing its enforcement on other areas of the law.  MRR will continue to monitor the DOL for any new guidance on these subjects.

Stacy V. Pollock is an Associate in MRR’s Columbus Office. For more info, contact her at spollock@mrrlaw.com.

 

MRR Article: What Does the New DOL Rule Mean for You?

Tami Hannnon

 

By: Tami Z. Hannon, Esq.
Mazanec, Raskin & Ryder Co., LPA

 

 

As you likely know, the Department of Labor (DOL) recently issued its final rule raising the salary requirement for overtime exempt workers.  What does this rule mean for you?

  1. All employers covered under the FLSA are covered by the proposed changes.

 If your business is subject to the FLSA or you have overtime exempt workers, then you are subject to the new regulations regardless of whether you are a private or public employer.

  1. This requirement does NOT impact those exempt as teachers, lawyers, or doctors.

 These professionals have been historically exempt from the salary basis requirement and continue to be so under the new regulations.

  1. The new salary level only impacts the required pay of your overtime exempt employees.

 To be exempt from overtime under the FLSA, the employee must meet two tests.  First, the employee must perform certain job duties that the FLSA views as being “white collar” or “exempt” job duties.  This new regulation does not change what those job duties are.  The second part of the test is whether the employee who performs those job functions is paid a certain annual amount.  Historically, that amount was $23,660 per year.  The new regulations increase that amount to $47,476 per year through December 31, 2019. In order for your overtime exempt employees to keep their exemption, they must be paid a minimum of $47,476 per year.  Please note that even if an employee is making at least $47,476 per year, the employee must still perform “white collar” job duties to qualify as overtime exempt.

For employees close to this level, consider whether you wish to increase their salary to maintain the exemption, maintain their current pay level but pay them overtime or keep their work to 40 hours per week.

  1. This requirement does NOT impact your non-exempt employees.

 Employees that were previously paid overtime are still entitled to overtime.  This new regulation does not impact their pay levels or requirements.

  1. An employee’s non-discretionary bonuses and incentive pay now count towards up to 10% of the required salary level.

 What this means is that for an employee at the $47,476 mark, $4,747 of their salary can come from non-discretionary bonuses, commissions, or other incentive pay linked to productivity or profitability.  To be considered part of the salary, the payment must be made at least quarterly and cannot be subject change at the discretion of the employer.  Rather, once the criteria for earning the bonus are met – certain production standards, performance standards, or overall company profitability – payment of the bonus must be mandatory.  Note that bonuses may be paid beyond this level, but no more than $4,747 will count towards meeting the necessary salary amount.

A non-discretionary bonus is one that you have promised, contracted, or agreed to pay to the employee and have no “discretion” in determining the fact of payment.  These can include bonuses in collective bargaining agreements, production bonuses, bonuses for quality and accuracy of work, attendance bonuses, and bonuses to induce employees to remain or continue employment until payment.  The latter can likely include longevity bonuses awarded to employees.

Meeting the pay requirement with bonuses:

  • Each pay period the employee must be paid a minimum of 90% of the $47,476 or higher salary level. For an employee paid bimonthly this means a minimum of $1,643.40 per pay period.
  • The remaining 10% will be paid in quarterly bonuses. If the total at the end of each quarter does not equal 13 weeks of full salary, then the employer must pay the remainder to the employee.
  • In our example, our bimonthly employee must be paid $11,869 per quarter ($913 per week for 13 weeks). At the end of the first quarter, the employee received 90% of this amount, or $10,682.10 through his regular pay.  If the employee does not meet the criteria for an incentive pay, the employee must still receive $1,186.90 in his next paycheck to ensure that the employee will be paid $47,476 by year’s end.  This calculation must be done quarterly as you only have one pay period for the “catch up” payment for missed bonuses.
  1. If you include bonuses and incentive pay in your salary, make certain to do the math to retain the incentive.

As the law requires you to pay the minimum $47,476 yearly even if the employee does not reach the necessary levels to receive the bonuses, make certain to do the math and make the bonuses worth reaching for.  Using our above example, the employee knows that he or she will still be entitled to a $1,186.90 check at the end of the quarter even if he or she does not meet the productivity or profitability standards to qualify for the bonus.  To keep the incentive, make sure that the associated incentive pay is greater than this amount to encourage the employee to continue to excel at performance.

For additional information or questions on the implementation of the new DOL rule at your company, please contact any of the following MRR Employment & Labor Law attorneys:

Tami Z. Hannon
440.424.0009 / thannon@mrrlaw.com

John T. McLandrich
440.287.8298 / jtm@mrrlaw.com

Stacy V. Pollock
614.324.0163 / spollock@mrrlaw.com

Neil S. Sarkar
440.287.8292 / nsarkar@mrrlaw.com

MRR Article: Department of Labor Issues Final Overtime Rule

By: Tami Z. Hannon, Esq.
Mazanec, Raskin & Ryder Co., LPA

The Department of Labor (DOL) has issued its final rule adjusting the salary requirements for employees to be exempt from overtime.  The DOL is not making any changes at this time to the other part of the exemption test – the duties the employee must perform to qualify for an overtime exemption.

Under the final rule,

  • An employee must make $913 weekly, or $47,476 annually to qualify for an exemption;
  • An employee must make $134,004 annually to qualify for an exemption as a highly compensated employee;
  • These levels will be updated every three years to align with the 40th percentile of weekly earnings of full-time salaried workers in the lowest-wage Census Region. The threshold for highly compensated employees will be adjusted to the 90th percentile of annual earnings of full-time salaried workers nationally.  The first update will occur on January 1, 2020.

The rule will also now permit employers to use nondiscretionary bonuses, incentive pay, and commissions to contribute towards a maximum of 10% of required salary levels for non-highly compensated employees.  This additional pay must be paid at least quarterly to be counted towards the salary requirements.

The final rule becomes effective December 1, 2016.


For more information or if you have any questions, please contact:

Tami Z. Hannon  – MRR Cleveland
Phone: 440.424.0009
Fax: 440.248.8861
Email:thannon@mrrlaw.com