SHRM Asks DOL to Rescind 2016 Overtime Rule

 

Allen Smith, J.D. By Allen Smith, J.D. May 22, 2019
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​In comments filed May 21 with the U.S. Department of Labor (DOL), the Society for Human Resource Management (SHRM) called for the department to formally rescind its 2016 overtime rule and move forward with its revised rule—but with some exceptions.

In November 2016, a court blocked implementation of the department's updated overtime rule, and a challenge to that rule is pending. It's time to let go of that rule, SHRM said, and move forward with the new one DOL proposed in March.

SHRM agrees with the DOL's proposal to stick to the 2004 method for setting a single, nationwide salary threshold for determining exempt status under the Fair Labor Standards Act (FLSA), a method the 2016 rule abandoned. Under the 2004 method, the DOL's proposed standard salary level would be $679 per week or $35,308 annually. But the proposed minimum required salary for the highly compensated employee exemption, which the DOL recommends increasing from $100,000 to $147,414, is too high, SHRM said.

SHRM backs the DOL's proposal to consider including nondiscretionary bonuses toward the minimum salary level. In fact, all types of bonuses and commissions should count toward the salary threshold as part of total compensation, SHRM added. The proposed rule would cap the credit for nondiscretionary bonuses at 10 percent of the standard salary level if the bonuses are paid annually or more frequently.

There should be no automatic adjustments to the salary threshold, but instead DOL should update the rule regularly through notice and comment procedures, SHRM said. Notice and comment ensure the employer community "has sufficient notice of proposed changes to which they will be bound so that they have an opportunity to respond to the proposal and offer the regulator opinions, facts and other information that will be helpful in crafting a final rule," SHRM stated.

In addition, the department should not vary salary thresholds based on geography or other factors. This would only increase costs and create confusion for employers and employees, SHRM said.

SHRM supports the DOL's position to refrain from changing the existing duties test.

It also asked the DOL to harmonize the overtime and regular rate-of-pay regulations. Regular rate requirements define what forms of payment employers include and exclude in the time-and-one-half calculation when determining overtime rates.

SHRM also asked the DOL to provide at least 120 days after a final rule for implementation.

We've rounded up articles from SHRM Online on the proposed overtime rule.

Proposed Rule Would Raise Salary-Level Threshold

In March, the DOL proposed increasing the salary-level threshold for white-collar exemptions to $35,308 per year from $23,660. "Employers will be relieved that the Department of Labor did not propose changes to the duties test," said Ryan Mick, an attorney with Dorsey & Whitney in Minneapolis. Changes to the duties tests "would have required many employers to undertake a far more complex analysis to determine exempt status for many employees."

(SHRM Online)

[SHRM members-only toolkit: Complying with U.S. Wage and Hour Laws and Wage Payment Laws]

Take Job Duties into Account

Meeting the salary cutoff is just one requirement for classifying workers as exempt and not eligible for overtime pay. Employers should also take the time to review workers' job duties to ensure they satisfy the applicable exemption's criteria. Under the FLSA, workers must be paid 1 1/2 times their regular rate of pay for all hours worked beyond 40 in a workweek unless they fall under an exemption. The most commonly used exemptions are the administrative, executive and professional, collectively called white-collar exemptions, each of which factors in multiple considerations. Of the white-collar exemptions, the administrative exemption creates the most challenges for employers, said Tamara Devitt, an attorney with Haynes and Boone in Costa Mesa, Calif.

(SHRM Online)

Remember State Overtime Exemption Rules

While the DOL proposed a $35,308 exempt salary threshold, some states have a higher cutoff. California's threshold is currently $49,920 for businesses with at least 26 employees and $45,760 for those with fewer. In New York, the state's minimum salary threshold for executive and administrative employees has been increased in phases, and the actual rate depends on location and employer size. For example, the threshold is currently $58,500 (annualized) for employees who work in New York City for large employers and fast-food restaurants and $52,650 for workers at other businesses with 10 or fewer employees. In Nassau, Suffolk and Westchester counties, the threshold is $46,800, and in other areas of the state it's $43,264.

(SHRM Online)

Prepare but Wait to Make Changes

The overtime rule hasn't been finalized yet, so employers shouldn't make changes yet. Employers should determine which workers may need to be reclassified and which ones should be given raises to keep them above the salary threshold if the proposed rule takes effect, according to Tammy McCutchen, an attorney with Littler in Washington, D.C. But she cautioned that the 2016 final rule "is not dead yet."

(SHRM Online)

[Visit SHRM's resource page on FLSA exemption classification.]

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