SYRACUSE — The U.S. Department of Labor (DOL) has proposed raising the salary figure on the test that determines an employee’s eligibility for overtime compensation.
The higher salary level would increase the number of employees to whom companies must provide overtime pay, if they qualify. The new rule would make almost 5 million white-collar workers newly eligible for overtime compensation, according to the Pew Research Center’s analysis.
The DOL proposal would be the first increase in the salary figure since 2004.
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The overtime regulations are part of the Fair Labor Standards Act (FLSA), says Jacqueline Jones, labor-law attorney and partner at Syracuse–based Mackenzie Hughes, LLP. Jones spoke with CNYBJ on Sept. 18.
The Mackenzie Hughes labor-law attorneys in a Sept. 15 seminar provided details on how the proposed DOL overtime regulation would affect employers throughout Central New York.
President Barack Obama in March 2014 ordered the Department of Labor to update the regulations so more workers will qualify for overtime pay, according to a slide in the law firm’s presentation.
The DOL on July 6 of this year published the proposed rule for the regulation update.
The comment period on the proposed rule, which ended Sept. 4, generated nearly 290,000 comments.
Business groups are opposing the proposal, contending that it could necessitate layoffs, cutting hours, or reclassifying some salaried positions to hourly positions.
The proposed rule would increase the dollar figure in the salary-level test from $455 per week to $921 per week, which equates to an annual salary of nearly $48,000.
The figure could also rise to $970 per week, or an annual salary of more than $50,000, according to the Mackenzie Hughes presentation.
“The Obama Administration decided that the earning power of that $455 a week had been eroded,” says Jones, noting it was last updated in 2004.
The DOL also wants annual increases to the levels in the salary test.
Overtime eligibility
The general overtime rule in the FLSA says compensation for employment above 40 hours needs to be at a rate “of not less than one-and-a-half times the regular hourly rate,” according to Mackenzie Hughes.
Certain categories and employees are exempt from, or don’t qualify under, the overtime rule. The positions include executive, administrative, professional, (or EAP), along with outside sales, and employees in computer-related positions. They’re also referred to as the “white collar exemptions.”
Companies don’t have to pay overtime to employees who are categorized as exempt from the regulation. Firms are required to pay overtime to non-exempt employees, or those for whom the regulation doesn’t apply.
With the proposed rule, the DOL contends it seeks to update the salary level to ensure that the FLSA’s intended overtime protections are “fully implemented,” and to simplify the identification of nonexempt employees, thus making the EAP exemption easier for employers and workers to understand, according to the agency’s website.
The exemption test focuses on both the employee’s salary and the individual’s duties and responsibilities, according to the Mackenzie Hughes presentation.
“An employee who is paid at least the minimum weekly salary specified and meets the duties and responsibilities test is exempt from the minimum wage and overtime requirements of the FLSA.”
The figure in the salary test for the overtime exemption in New York is higher, says Jones.
Instead of $455 a week, the salary figure in the test for executives and administrative positions is $656 a week, which will also rise at the end of the year.
“You have to meet that salary test [along with] very specific definitions for those five categories [as well as] the types of work you have to do and [basically,] it has to be important work,” says Jones.
What’s next?
Jones figures the DOL will make a decision on the proposal by the end of the year.
The department will decide when to finalize the regulation and if it should adjust the proposal based on the number of comments provided during the feedback period. The final regulation is published in the Federal Register, the daily journal of the U.S. government.
Jones suggests employers conduct an audit of their payroll and determine which employees are categorized as exempt, or those who earn between $25,000 a year and $50,000 a year.
“They should figure out who those people are, what the payroll costs are, how many employees are affected, and they should understand that when these regulations are finalized, that those individuals … [who] are earning below that $921 a week or $970 a week will be required to be paid overtime, unless they fall into those exemption [categories],” says Jones.
