Employers might be reading about the new proposed rule for salaried employees and start to panic like many did when the Obama administration introduced similar rules in 2016.
Earlier this month, the Labor Department announced a proposal that it said would make more than a million more American workers eligible for time-and-a-half pay for all time worked over 40 hours a week.
The proposed rule would increase the current salary minimum from $455 a week ($23,660 annually) to $679 a week (or $35,308 annually).
The department also proposed increasing the highly compensated employee minimum threshold from $100,000 annually to a surprising $147,414 per year, more than was proposed under President Barack Obama’s administration.
The Labor secretary touted his commitment to updating the 2004 overtime threshold, adding the “proposal would bring common sense, consistency and higher wages to working Americans.”
The Labor Department under Obama had proposed in May 2016 to increase the minimum salary for white-collar exempt employees from the current minimum threshold of $455 a week to $913 a week.
It also proposed to increase the minimum threshold for highly compensated employees from $100,000 annually to $134,000.
Several states sued to stop the rule from becoming law, and an appeals court issued an injunction. After President Donald Trump took office, the proposed rule essentially died.
The latest proposed rule change, however, is mere window dressing and does little to address an outdated law in need of a major overhaul.
The 1938 Fair Labor Standards Act remains a 20th-century law for the 21st-century workplace.
Unfortunately, regardless of the administration in office, no leader seems to be able to make the major changes needed to this law so that it is easy to administer and recognizes the evolving nature of today’s workforce.
For example, the overtime rules still assume that workers work exactly 40 hours every single week, that they take exactly 30 minutes or more for lunch every day and/or that they stop working after they leave the workplace or that they come into the workplace at all.
In addition, the proposed rule does not address the extremely complex and outdated duties test that still applies to all white-collar, outside sales and technology workers.
Salary is but one part of an extensive and complicated analysis that must be performed for every single exempt employee to determine if an employee is properly classified as exempt from overtime.
Few employees currently earning less than $35,308 could meet a duties test to qualify for the exemption. Therefore, the rule changes little for most employers.
Employers should be focusing their attention not on the salary basis test, but in determining if their employees are properly classified as exempt based on their duties.
If not, they should convert those employees to non-exempt, which requires they be paid overtime for all time worked over 40 in a workweek.
Defining working time remains a constant struggle for many employers because it can include unexpected activities such as time responding to emails after hours, time going to the bank to make a deposit for the company or even time picking up a cake on the way to work at the employer’s request.
Employers should not wait until the new law takes effect to review their current exempt workforce to determine, regardless of salary, if their employees meet the test.
When in doubt, employers should default to classifying the employees as non-exempt.
Employees who otherwise qualify for the exemption can be classified as non-exempt as long as they are paid overtime consistent with the law.
The Labor Department is accepting comments on the proposed rule, which is expected to take effect Jan. 1.
To get more information on the rule changes, go to www.dol.gov.