Overtime Regulations on the Horizon: What to Start Thinking About Now

11 May 2015 Labor & Employment Law Perspectives Blog

Wage and hour issues are oftentimes amongst a company’s least favorite topics of conversation and yet, at the same time, can be the source of major liabilities. And just as the corporate world tries to figure out where the Department of Labor (DOL) and the courts are going with the Fair Labor Standards Act (FLSA) and state wage and hour laws, more change is on the way. We have previously indicated that the Obama administration has charged the DOL with changing the federal regulations governing overtime pay, and newly proposed regulations relating to overtime pay are now one step closer to becoming a reality. On Tuesday, a comprehensive write-up of the regulations was sent to the White House Office of Management and Budget for review.

What can we all expect from the new regulations? Certainly, the goal of the new regulations will be to expand overtime protections (meaning more pay…) to employees. As the DOL claims in a recent blog post about the topic, “the rules governing who is eligible for overtime have eroded over the years. As a result, millions of salaried workers have been left without the guarantee of time and a half pay for the extra hours they spend on the job and away from their families.” While we editorially note the federal rules governing eligibility have not “eroded” at all and that properly classified salaried workers have no guarantee of time and a half under those eligibility rules created by the DOL that the Department is now criticizing, the bottom line is nonetheless that employers can expect the DOL to try to cover more of their workforce by the federal overtime regulations and make them subject to overtime protections.

While the draft rules still await publication, followed by an opportunity for public comment prior to final rulemaking and effectiveness, we can surely expect big changes on the horizon. For example, it is a virtual certainty that the $455 weekly salary threshold for workers to meet the white-collar exemption will be raised, given that figure has not been raised since 2004.

Another area of change is likely to be the “executive exemption.” Under the current framework, the propriety of the exemption requires an analysis as to whether a primary duty is the management of employees. The potential setting a fixed percentage of an employee’s work that must be devoted to managerial tasks — like California’s rule that more than one-half of an exempt employee’s time has to be devoted to exempt work — could have an incredible impact in the retail and hospitality sectors, where managers frequently step in and handle nonexempt tasks when needed on the floors of the businesses. We can expect the DOL will try to cut back on the “sole in charge” executive such as retail store managers and managers of fast food outlets.

So what can employers do now to get ready for the still ill-defined changes? First, keep an ear to the ground. Employers must remain engaged in the process and be aware of proposals that are floated. Second, participate in the public comment period. The DOL must review and consider all of the comments submitted by the public during the rule-making process. If you anticipate major impacts on your business, consider sharing those impacts in the comment period either directly or through trade associations which you may belong to. Finally, start thinking proactively of those job descriptions on the “bubble” now, so that you are not caught off guard when the rules change.

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