Major Changes in Store for Classifying Worker Overtime Status
Nilan Johnson Lewis labor and employment attorney Joe Schmitt analyzes President Obama’s push for expanding overtime rules, and explains the impact on businesses and employees.
The United States Department of Labor is set to announce significant changes to the “exempt” classification of employees under the Fair Labor Standards Act (FLSA). First passed in 1938, the FLSA governs minimum wage, overtime pay and recordkeeping requirements for both public and private employers. President Obama directed the DOL to review eligibility rules for overtime exemptions, which have not changed since 2004. The DOL announced preliminary changes and solicited public comments regarding those proposed changes. The DOL received over 30,000 comments, and is currently assimilating those comments and determining whether and how to modify the exemption rules. According to Nilan Johnson Lewis attorney Joe Schmitt, the DOL could soon announce significant changes in the way employers evaluate workers’ exempt statuses.
Joe Schmitt regularly provides counsel to management, including preventative advice and litigation defense in discrimination, wage-and-hour, and other employment matters. Schmitt has been a frequent commentator on the FLSA. In studying the preliminary proposed changes and the comments received by the DOL, Schmitt observes that:
- The required salary will certainly be raised, and the DOL’s proposed $50,000 figure (more than double the current requirement) is likely to be adopted despite many negative comments from business. Everyone recognizes that the salary should go up, as the current $455 weekly salary maximum for overtime eligibility is out-of-date. Moreover, the very large proposed increase will likely be politically popular and could be a key campaign issue for the Democratic party leading up to the 2016 elections.
- The DOL should not apply changes with an urban mindset only – Schmitt notes that these new overtime exemption rules will affect businesses and economies nationwide, and that it is important for the government to establish salary thresholds that don’t just work for Manhattan, New York but also Manhattan, Kansas. Balancing the economic needs and concerns for rural areas as well as urban regions will be difficult, but vital.
- Other potential changes to the regulations could dramatically alter hiring and other employment practices. Although the DOL did not propose to adopt the so-called “50 percent test” already employed in California, many unions and employee groups have urged the DOL to reverse that conclusion. Under the 50 percent test, even employees whose primary, and most important job responsibilities are exempt would still be overtime-eligible if they spend half or less of their time performing those exempt duties. Schmitt says this would represent a very significant change that would force many now-exempt employees into hourly jobs and substantially magnify employers’ potential wage-and-hour liabilities.
Joe Schmitt is available for phone or in-person interviews by contacting Aaron Berstler or Jeff Trauring at 651.228.9141.