WHERE ARE THE RULES?: In an unexpected development, the Department of Labor (DOL) has quietly released information indicating that the proposed changes to the overtime rules may not take effect until close to the end of 2016. After the DOL closed the 60 day comment period, conventional wisdom was the regulations would follow in early 2016. Yet the DOL has not released any information regarding its progress toward final regulations. At the present time there is no official announcement from DOL and a disclosure by a DOL official that the finalized changes to the FLSA’s overtime eligibility rules likely will not be issued until late 2016. Given this scenario, one can surmise the new regulations will not take effect until 2017.
We do not have a clear indication of what the finalized rules will look like yet. The period during which the public can comment on the proposed rules ended September 4, 2015, and the DOL received roughly 270,000 comments during that period. That is approximately three times the amount of comments the agency received when it last updated the overtime rules back in 2004. About 50,000 comments came in during the last week alone. Perhaps the amount of comments the DOL received and the complexity of the law factored in to the agency’s decision to look at a later date for releasing the rules.
WHAT WILL THE RULES LOOK LIKE? We do know a few things for certain about what will be in the final rules:
· The minimum salary threshold will rise … significantly. The current threshold a worker must hit to be overtime-exempt is $23,660. The proposed rules seek an increase to $50,440. While it may not climb quite that high, it will climb — likely to at least $40,000.
· After the initial salary threshold increase, the threshold will automatically increase again. For the first time ever, the salary threshold will be tied to an automatic-escalator, so it can keep pace with inflation.
The DOL is considering making changes to the duties tests in the future. The DOL has not suggested changing the executive, administrative, professional, computer or outside sales duties tests yet, but did specifically seek comments on whether the tests should be changed and whether they are working to screen out employees who are not bona fide white collar exempt employees. One possibility is adopting the California test, which requires that 50% of an employee’s duties be for the exempt purpose in order for the exemption to apply. It is also unknown whether there will be a shorter window for implementation. It could be as low as 30 days and as great as 120 days.
SHOULD I WAIT UNTIL 2017? This announcement appears to buy employers more time to prepare, but waiting to look at your job descriptions and exempt classifications may not be the smartest strategy. It is a best practice to maintain accurate job descriptions and employee classifications, which also aids in a well-run workplace. A beneficial review of these issues necessarily takes time. Moreover, increased attention to the federal overtime rules and job duties means your employees are probably looking at their job descriptions and wondering whether they should be paid overtime.
Then, there is the unknown impact of the presidential election. For instance, if certain candidates are elected, the rule changes will be repealed instantly. There are some employers who will bank on the election outcome and will not do a thing. Leave those odds to Vegas.
We recommend the following actions:
· Start getting ready for the changes now. It will not be a quick process.
· Look at each position– and not just the job description– but what the employee is actually doing. If the employee is not spending at least 50% of his or her time on exempt duties, either change the duties or reclassify the employee as non-exempt.
· Look at the hours the employee works. If the hours worked and position duties do not warrant a salary of between $40,000 and $57,000, consider reclassifying as non-exempt.
· If reclassifying as non-exempt, look at actual hours worked and ways to limit overtime. This may mean restructuring jobs and transferring responsibilities.
STATE vs FEDERAL EXEMPTIONS: Finally, keep in mind that not all federal exemptions are recognized by the states and vice versa. If you are relying solely on any federal exemption to classify employees as exempt, you may be in violation of your state wage laws. For example, Massachusetts has the same white color exemptions as the federal rules but does not recognize an exemption for inside sales. Now is the time to audit all of your positions to check the legality of your exemptions. The federal overtime change is still undefined, but the Massachusetts Wage Law and other state laws are specific.
FINAL THOUGHT: Start 2016 ready to go and in compliance with all wage laws. We can help.