Commentary: The Department of Labor's proposal to increase the salary level requirement for being exempt from overtime is anticipated to impact 6 million workers. The current threshold is $23,660 per year, and the proposed new threshold is $50,440. Many of these employees are low level managers or managers in the retail and food industries. Many are also in some lower paid professions, such as social work. The proposed new threshold would also increase annually so that it remains at the 40th percentile of full-time salaried employees.
The government claims that these changes are good because more employees will be eligible for overtime pay. This does not mean that these employees will earn more money or even work less. It will depend.
For instance, an exempt employee who's currently paid a salary below the proposed new threshold but who only occasionally works over 40 hours per week may simply be told to not work over 40 hours in a week. If the employee regularly works over 40 hours per week, though, the employer will have a few options. For instance, particularly if the current salary is close to the new proposed threshold, the employer could raise the salary to meet the new threshold and not change the employee's schedule. The employer could also recalculate the salary so that the new hourly wage plus overtime will equal the current weekly pay total. Under this scenario, the employee will only get more if the employee works more than the current regularly scheduled hours, but the employee may also lose pay if the employee works less than the current typical schedule.
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Thus, while some employees may get more pay, some will not. Further, while some employees may work fewer hours, working fewer hours may result in less pay. In addition, as employers revise their compensation structures to lessen the burden of overtime, such as converting some salaried employees to hourly, those employees may lose the status they enjoy as being exempt, as well as some bonus opportunities and other benefits. It's therefore far from clear that these changes are desired by many of the 6 million impacted.
The comment period for the proposed regulations closes Sept. 4, 2015. The DOL is seeking feedback on the annual proposed annual adjustment concept in particular, to see if using the CPI would be more appropriate. The DOL is also seeking feedback as to whether under the new rule, employers should be able to factor in nondiscretionary bonuses, such as productivity or profit sharing bonuses, into the amount used for meeting the higher salary threshold.
The DOL's proposal does not make a change to the duties test under the current regulations. Many expected the DOL to do so by requiring that more than half of the time spent working per week be devoted to exempt duties, and that for that time, no nonexempt duties can be performed. While the proposed regulations do not go that far, the DOL is asking for comments about adopting a standard which existed prior to 2004, that is, by stating that no more than 20% (40% for retail employers) of the time may an employee perform nonexempt duties.
Robert A. Boonin is a member of Dykemas labor and employment practice group.
