DOL Will Listen to Employers on Upcoming Overtime Rule

 

Allen Smith, J.D. By Allen Smith, J.D. September 6, 2018
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​The Department of Labor (DOL) has scheduled five listening sessions in September where employers can share their concerns about an upcoming proposed rule on the white-collar overtime exemptions, with the first session scheduled for today in Atlanta.

The sessions on the rule, tentatively slated to be released in January 2019, will focus on the appropriate salary threshold for the white-collar exemptions and the frequency for updating the salary threshold. Employers also are likely to ask that bonuses be included in the calculation of the minimum salary threshold for the overtime exemptions.

The Society for Human Resource Management (SHRM) "is pleased that the DOL is moving forward to update the regulations regarding overtime," said Nancy Hammer, SHRM's vice president of regulatory affairs and judicial counsel. "We look forward to providing input during the upcoming listening sessions to help DOL determine an updated salary threshold that will help employers and employees determine proper classifications under the FLSA [Fair Labor Standards Act]."

Timing of Proposed Rule

If the DOL meets its January deadline for a proposed rule, it will then receive public comments on the proposal and a final rule probably would not be in place until sometime in 2020, predicted James Swartz Jr., an attorney with Polsinelli in Atlanta. Employers may learn more about the timing of the proposed rule at the listening sessions, he added.

A complicating factor in issuing a proposed rule is that the DOL's Wage and Hour Division still lacks an administrator, as the nomination of Cheryl Stanton remains pending, noted Steven Suflas, an attorney with Ballard Spahr in Denver and Cherry Hill, N.J. So don't be surprised if the proposed rule doesn't come out in January, he said.

Appropriate Salary Threshold

Expect a change in the salary threshold for the white-collar exemptions, Suflas said. This, he said, is an issue "upon which almost everyone agrees."

The question is how much the salary threshold will increase. Currently, the threshold is $23,660, where it has been since 2004. The Obama administration overtime rule would have increased it to $47,476, which SHRM opposed as too much, too fast, although SHRM supports an increase to the exempt salary threshold. In 2016, a federal district court judge in Texas blocked the Obama administration's overtime rule.



Steven Pockrass, an attorney with Ogletree Deakins in Indianapolis, said that employer testimony on the appropriate salary threshold can be particularly effective when it includes real-world examples of:

  • Budgeting challenges.
  • Implementation costs.
  • Other challenges that private sector, public sector, for-profit and nonprofit businesses of varying sizes and locations would face depending on the amount, timing and frequency of any increases.

Employers should be ready to respond to DOL inquiries about any benefits associated with a higher salary threshold, noted Aaron Nadich, an attorney with Nixon Peabody in Providence, R.I. 

For instance, an increased threshold might lower litigation costs by reducing the number of employees whose exemption status is unclear. In particular, more employees will be automatically deemed nonexempt based upon the higher salary threshold without regard for the duties test. Therefore, employers will need to treat those employees as nonexempt and thus reduce litigation costs in the instances where an exempt employee's status under the duties test might have been questionable.   

The DOL should be mindful that in setting a new national salary threshold for the white-collar exemptions, "The department should not overreach, as the last administration's DOL was deemed to have done," said Gerald Hathaway, an attorney with Drinker Biddle in New York City.

[SHRM members-only form: Fair Labor Standards Act exemption questionnaire]

Frequency of Updates

The DOL is considering automatic indexing of the salary threshold, which Lee Schreter, an attorney with Littler in Atlanta, said is the issue that she is "most concerned about."

Not only can the salary threshold rise quickly with indexing, but it can result in salary compression, she said. If the salary threshold for the overtime exemptions automatically increases, employers may choose to increase the salaries of employees at the salary threshold to keep them exempt from overtime pay. Employers want to reward performance, but, with automatic indexing, employers wind up raising salaries for reasons unrelated to performance and provide smaller increases based on merit, she noted.

Bonuses

Employers should ask the DOL to allow them to credit all bonus amounts toward the salary threshold, Schreter added. Currently, there is no regulatory provision to count incentive pay toward the salary threshold.

Ryan Vann, an attorney with DLA Piper in Chicago, noted that nondiscretionary bonuses and commissions could constitute only up to 10 percent of the threshold amount under the Obama administration's overtime rule.

Also under the Obama rule, bonuses had to be paid on a quarterly or more frequent basis to count toward the threshold. Annual bonuses, therefore, weren't included in employee compensation for purposes of the exemption threshold.

"Employers should insist that the new salary basis calculation include all nondiscretionary bonuses and incentive or commission pay received in a year, regardless of frequency of payment," Vann said.

Listening Sessions

The DOL's listening sessions will be held in the following locations. They are free but registration is required:

  • Sept. 7: 10 a.m. to noon, Atlanta, (This session is full.)
  • Sept. 11: 10 a.m. to noon, Seattle
  • Sept. 13: 10 a.m. to noon, Kansas City, Mo.
  • Sept. 14: 10 a.m. to noon, Denver
  • Sept. 24: 10 a.m. to noon, Providence, R.I.
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