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Federal Overtime Regulations Impact All Businesses

Posted By John Chwat, Director ESA Government Relations, Friday, September 09, 2016

New overtime regulations issued by the U.S. Department of Labor (DOL), which raises the salary threshold for employees who are exempt (white-collar salaried) from overtime pay from $23,660 ($455 per week) to $47,476 ($913 per week), take effect Dec. 1, 2016. Any salaried employee meeting the U.S. DOL’s criteria making less than $47,476 a year and working more than 40 hours a week will be entitled to overtime pay. This will add more than 4.2 million workers who are currently not covered. The U.S. DOL has also provided a mechanism in the overtime rules to automatically update the salary levels every three years, beginning Jan. 1, 2020. A summarization of the 165-page ruling can be found on the Wage and Hour Division page of the U.S. DOL website, including a very detailed Q and A section.

The U.S. DOL has pointed out that seven revisions have been implemented since the rule was first issued in 1938, with the most recent changes to the overtime salary levels made in 2004.

The Electronic Security Association (ESA), as the voice of the industry, opposed the issuing of these overtime rules. In comments submitted to the U.S. DOL last fall indicated that the original intent of the Obama Administration, in their own words presenting this new policy, sought “…to transfer to employees from employers due to the overtime pay provisions an estimated $1.435 billion dollars,” which is an outrageous burden on small businesses and will result in consequences for sales, profits and operations for the immediate future. ESA warned that many small businesses in the industry would “…be forced to lay off employees to fund the increase in wages, lower wages, reduce overtime or rely on temporary part-time staff.”

The U.S. DOL has indicated that incentive payments to employees, including commissions to satisfy up to 10 percent of the salary requirement and bonuses tied to productivity or profitability, will be considered in the final salary standard.

The U.S. Congress has been divided in its response to these regulations, including a difference of approach within the business community. The U.S. Chamber of Commerce, National Association of Home Builders (NAHB), American Society of Association Executives (ASAE), representing most trade and professional associations, and others have supported passage of bill HR 5813, the Overtime Reform and Enhancement Act by Rep. Kurt Schrader(D-OR). This overtime reform bill seems to accept the premise of an increase in overtime pay, but initiates a three-year phase-in of the regulations as follows:

Increase Date Yearly Per Week
 Dec. 1, 2016  $35,984  $692
 Dec. 1, 2017  $39,780  $765
 Dec. 1, 2018  $43,628  $839
 Dec. 1, 2019  $47,476  $913

 

The bill further eliminates the automatic three-year salary thresholds. HR5813 was introduced prior to the August recess by Congress (on July 14, 2016) and is pending in the House Education and the Workforce Committees where it is only supported by four other Democratic members. Sen. Scott (R-SC) and Sen. Alexander (R-TN), chairman of the Senate Health, Education, Labor and Pensions Committee, have introduced bill S.2707, the Protecting Workplace Advancement and Opportunity Act, which seeks to reverse and repeal the present regulations. A similar bill has been introduced in the House, HR 4773 by Rep. Tim Wahlberg (R-MI), however, even if the House and Senate pass this bill, the White House has indicated it will veto its provisions, denying its passage into public law. These two repeal bills are supported by 17 “free market” groups including Americans for Tax Reform and Americans for Prosperity.  Other members in the House and Senate have urged language be placed in the proposed continuing resolution or large bill that will fund the entire federal government including the U.S. DOL, to halt implementation of the Overtime Rule. Others have suggested that a Republican president and Congress could repeal the regulations. Unless Congress addresses these bills in the remaining weeks prior to Dec. 1, 2016, the new overtime rule will come into force.

Final Rule

Overtime Overview

Questions and Answers

Fact Sheet: Overtime Final Rule 

 

Guidance for Employers

Guidance for Non-Profits

Guidance for Higher Education

Guidance for States and Local Governments

Summary of the Economic Impact Study

Comparison Table: Current Regulations, Proposed Rule, and Final Rule

State-by-State Breakdowns of Workers Affected by DOL’s Final Overtime Regulation

DOL Overtime Page

Overtime NPRM Page


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