A bill co-sponsored by North Florida congresswoman Gwen Graham, D-Tallahassee, is seeking to slow down the full implementation of impending changes to the overtime classification regulations pushed through by the Obama Administration.
The new regulations enacted by the U.S. Labor Department are set to go into effect on December 1, 2016, affecting every private employer in the country.
They change the way in which certain employees may be classified as exempt from overtime pay benefits under the federal Fair Labor Standards Act, and are expected to increase employers’ payroll costs. President Obama implemented these changes administratively in an effort to increase the pay of eligible employees after he failed to get Congress to increase the federal minimum wage of $7.25 an hour.
The President has estimated that the new regulations will affect about 4.7-million American workers in 2016, including 370,000 in the state of Florida.
To be properly classified as exempt, employees must meet certain job duties criteria that remain unchanged. These typically salaried “white collar” exempt categories include executive, administrative, and professional employees, along with certain computer employees and “outside salesmen” (salespersons who work outside the office).
What has now changed dramatically is the minimum salary threshold that also must be met to qualify for the exemption, which is being more than doubled. Starting on December 16, an employee must earn at least $913.00 per week ($47,476.00 per year) to be exempt. The threshold salary minimum to qualify for an exemption up to now had been at least $455.00 per week, that is, $23,660.00 a year.
The higher salary threshold is expected to result in many employees losing their professional “exempt” status and being switched to the status of hourly paid employees with the right to be paid 1-1/2 times their regular hourly rate for all overtime hours worked in excess of 40 in any week.
Additionally, under the new rules the threshold will be adjusted automatically every 3 years to meet a pre-determined formula, maintaining the level “at the 40th percentile of full-time salaried workers in the lowest-wage Census region.”
The new bill, introduced on July 14 by Congressman Kurt Schrader, D-Oregon, together with Graham and three other Representatives, all Democrats, is called the “Overtime Reform and Enhancement Act” (H.R. 5813). It seeks to gradually phase-in the Department of Labor’s final overtime regulations. The legislation would still provide eventually for a salary threshold increase to the $47,476.00 level, but would provide additional time for employers to ensure compliance, communicate changes to their employees, and accurately reclassify any employee if necessary. According to Schrader, “Without sufficient time to plan for the increase, cuts and demotions will become inevitable, and workers will actually end up making less than they made before.”
The legislation is being promoted by the Society for Human Resource Management (SHRM), whose members include more than 285,000 Human Resources professionals. SHRM argues that “DOL’s increase of more than 100 percent to the salary threshold in the first year is simply too far, too fast.”
If enacted into law, H.R. 5813 would phase-in the DOL’s new salary threshold over three years, starting with a 50% increase to approximately $35,984.00 on December 1, 2016, with additional increases effective in December 2017, 2018, and 2019.
Once the new overtime rules take effect, employers will need to decide whether or not to raise exempt employees’ salaries to at least the new minimum threshold in order to retain the exemption; or to keep current salaries below the new threshold and start paying overtime for hours worked in excess of 40 in a week. The new rules will likely impact managers and supervisors in the retail, fast-food, and janitorial industries right away.
