GREENVILLE — The Darke County Chamber of Commerce held a member-only event to help local businesses and non-profits learn and prepare for the new Department of Labor’s (DOL) Overtime Rule that takes effect December 1, changing the wage threshold and qualification rules for salaried employees.
Attorney Amy C. Mitchell, director with Dunlevey, Mahan & Furry, held the seminar and explained to attendees what the changes meant to their organizations. Mitchell said the DOL Overtime Rule contains a “small change with a big impact” for businesses.
“This has been a longtime coming,” said Mitchell. “We were told back in 2014 that these rule changes, some rule changes, to the overtime exemption were going to be coming.”
After the current White House Administration failed to raise the national minimum wage (the last increase was in 2009 to $7.25 per hour) and with its focus on “middle class economics,” it made updates to the regulations defining and delimiting the exemptions for Executive, Administrative and Professional salaried employees.
“This is the single biggest step I can take through executive action to raise wages for the American people…if employers don’t want to raise wages, they can let them go home after 40 hours AND see their families or train for new jobs. Any way you slice it, it’s a win for working families,” said President Obama during his weekly address on May 28.
Mitchell said, “If you look at it from an employer’s perspective, it’s not necessarily going to be a win, even for working families.”
President Obama directed U.S. Secretary of Labor Thomas E. Perez to revise the white-collar exemption regulations with that process beginning in 2014.
“Under this administration, we are back in the enforcement business, putting more cops on the beat and giving them more resources to protect working families who bear the greatest burden when labor standards are violated,” said Perez on Dec. 4, 2014.
The final new rule was announced on May 18 and is estimated to cause 4.2 million workers to lose the overtime exemption status, moving them from salaried to hourly positions. Employers are expected to pay $12 billion more in overtime over the next 10 years.
The impact of the new rule is “big” said Mitchell. An estimated 134,000 workers in Ohio will be impacted by the change. Mitchell said it’s estimated to impact women more than men in the workplace.
“More women are going to lose the overtime exemption,” said Mitchell. “More women will be entitled to overtime than men.”
It will also impact workers under the age of 25 and employees without a high school degree.
There have been two lawsuits filed in an attempt to stop the new rule: one was filed jointly by 21 states including Ohio and the other by the U.S. Chamber of Commerce citing arguments that the salary threshold is too high, the DOL was arbitrary and capricious adopting the new threshold (didn’t do the proper studies), and the Escalator Provision violates the notice and comment requirement for rulemaking under the Administrative Procedure Act.
Other opponents of the rule, including the former administrator of the DOL, said this has potentially negative impacts for converting employees to non-exempt status due to reduced flexibility for workers, limited career advancement, and increased wage and hour litigation for employers.
Legislation put in place to block the new rule are the Protecting Workplace Advancement and Opportunity Act (would stop parts of it) and The Regulatory Relief for Small Businesses, Schools and Nonprofits Act (would delay it). According to Mitchell, both pieces of legislation will have an “uphill battle” and not likely stop the new rule from taking effect.
“If you oppose the new rule, we can keep our fingers crossed that something will stop it, but we have to be prepared for it,” said Mitchell.
The highlights of the new Overtime Rule are:
- 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 ($913 per week; $47,476 annually for a full-year worker);
- 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 ($134,004); and
- 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;
- Additionally, the Final Rule amends the salary basis test to allow employers to use nondiscretionary (promised – either time or amount) bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the new standard salary level;
- No changes to the “duties test” that determines if you are, or are not, a salaried employee and in what category
More information regarding new Overtime Rule and the tests for white collar exemptions can be found online at https://www.dol.gov/whd/overtime/final2016/
Non-profit organizations face their own set of challenges and qualifications for salaried workers that are based on the Fair Labor Standards Act’s intended overtime protections.
Highlights of guidance for paying overtime for non-profits are:
- Enterprise coverage: Annual sales/business of $500,000 – income from contributions and fees are not counted toward the threshold
- Individual employee coverage: Engage in interstate commerce – makes or receives interstate telephone calls, ships materials to another state or travels to another state
- Employees may not volunteer time to their own non-profit employer by performing the same type of work
Mitchell warned that because of the new rule businesses should establish in their handbooks clear rules on unauthorized work/overtime. She said the DOL will be more aggressive in doing audits and that 44 percent of investigators are completing random audits based on complaints received. If found noncompliant, a business could be assessed double the fines and incur additional civil money penalties.
“The damages are great if somebody is fined an overtime violation…Compliance to the best that you can is important to your bottom line,” said Mitchell.
The DOL has launched a Timesheet App that is user-friendly in the hopes of encouraging complaints, said Mitchell. She anticipates legal fees for businesses rising and employees filing lawsuits or joining collectively in class action lawsuits.
Mitchell recommends businesses perform self-audits with the help of an attorney to look at procedures, current positions, realigning of job duties, eliminating positions, hiring part-time help, a time-keeping system, restructuring (reduction) of wage rate and benefits, establishing work hours and break schedules, rules regulating off-duty work and personal time off (PTO) policies.
The event was hosted by the Darke County Human Resources Council and sponsored by Phelan Insurance Agency.
The writer may be reached at 937-548-3151. Join the conversation and get updates on Facebook search Darke County Sports or Advocate 360. For more features online go to dailyadvocate.com