Overtime & Salary Pay

[Bradr]

 

On May 18th, 2016 United States Department of Labor has issued its final rules raising the minimum salary requirements for exempt executive, administrative and professional employees ("EAP"). Effective December 1, 2016, to be exempt from the payment of overtime, the employee must be paid a minimum of $913 each week ($47,476 annualized) and satisfy the "duties test" for the claimed exemption. The exemption for outside sales employees is unchanged.

Here is a summary of the new rules:

1. Standard salary level. The final rule raises the required salary from $455 a week to $913 a week or $47,476 annualized, for an EAP exempt employee.

2. Highly Compensated Employees. The salary level for Highly Compensated Employees is increased from the current $100,000 to $134,004 a year. Highly Compensated Employees are otherwise nonexempt, but perform at least one exempt duty and meet the Highly Compensated Employee salary requirement.

3. Automatic updates. The salary level for all exempt employees will increase every three years beginning August 1, 2019, effective the start of 2020. For example, in 2020 it is projected a Highly Compensated Employee would be paid at least $147,504.

4. Bonuses, incentive payments and commissions. Up to 10% of the salary threshold for non-Highly Compensated Employees may be met by non-discretionary bonuses, incentive pay, or commissions, provided these payments are made on at least a quarterly basis.

5. Duties test. There are no changes to the duties test that determines eligibility for the white-collar salary exemptions. For employees with salaries above the updated salary level, employers must continue to use the same duties test to determine whether or not the employee is entitled to overtime pay. Remember satisfying the duties tests is determined on an individual employee basis, and not on a job classification or job description.

 

I sometimes wonder if the government even thinks these things through.

 

Businesses only have so much money. More money doesn't just magically appear to satisfy the needs of these laws. Not without raising prices. Or eliminating costs. And the cost of labor is quickly becoming the most expensive part of running a business.

 

I believe we are going to see "unintended" consequences before these laws actually help people.

 

Businesses are going to increase the use of automation, business owners will eliminating overtime in many positions, additional non-overtime employees will be hired at a lower salaries, and businesses will reduce salaries to compensate for increase in new overtime wages, which would in effect give the employee the same pay rate as before.

 

If you want to help people, have government take a step back and quit wasting taxpayers money on special interests and bureaucracy.

 

Also, forcing wages on businesses as a blanket law across the country is irresponsible and reckless. At the very least, let each state decide, so that there can be some sort of local accountability.

 

At least with the minimum wage laws, on a state level, there is some form of local input to offset the enormous discrepancies between standards of living from state to state.

[84HuskerLaw]

Just another Obamanomics step to destroy the standard of living of more middle class workers. This will result in further pay erosion and displacement for workers (what few are left) still making 'decent' money compared to many who have seen dramatic pay (after tax and inflation degredation) declines. Awful. The medium income workers will now be replaced by more new low wage workers - just what the Dems are trying to do is create a permanent underclass of about 55% of the population to create a guaranteed win in each election. Sickening.

[BigRedBuster]

We have been dealing with these new laws for the last 4-6 months trying to figure out what the hell we are going to do. We have been waiting for the final ruling on the regulations and it appears they haven't alleviated any of our concerns.

 

We have probably 3-5 employees that we have absolutely no clue what we are going to do with. It is virtually impossible to keep their job the way they have been doing it and abide by these regulations. Sad thing is, they like how they currently are employed and they very well may NOT like what needs to change.

 

This is one area that the government had absolutely no friggen clue what they were doing when they put these rules in place.

 

I will guarantee you that a year from now, if these stay in place, you will be able to walk into just about any midsize or larger company and find violations and the company probably thinks they are abiding by every rule possible.

 

Friggen idiotic.

[darkhorse85]

What's going to stop an employer that has their employees working more than 40 hours per week from cutting their base pay to a level where their pay would remain around the same after overtime is paid? I didn't read anything that would guard against that. That's a super sh**ty thing to do but I bet we'll see it happen.

[funhusker]

We have been dealing with these new laws for the last 4-6 months trying to figure out what the hell we are going to do. We have been waiting for the final ruling on the regulations and it appears they haven't alleviated any of our concerns.

 

We have probably 3-5 employees that we have absolutely no clue what we are going to do with. It is virtually impossible to keep their job the way they have been doing it and abide by these regulations. Sad thing is, they like how they currently are employed and they very well may NOT like what needs to change.

 

This is one area that the government had absolutely no friggen clue what they were doing when they put these rules in place.

 

I will guarantee you that a year from now, if these stay in place, you will be able to walk into just about any midsize or larger company and find violations and the company probably thinks they are abiding by every rule possible.

 

Friggen idiotic.

Not sure how much your willing to share, but I'm curious.

 

How many hours a week do your employees work that will be affected? And what type of positions are they?

 

My understanding was these jobs would include people who are salaried, but work more than 40 hours to avoid overtime. I had a job similar to this right after college. I was inside sales for a electrical wholesaler. I would work 9-10 hours a day but only compensated for 40. However, at the end of the year I was able to participate in profit sharing, which made up for the hours and then some. (but these profits were, in part, because we saved money on payroll) I was fortunate to be part of a profitable company.

 

On the surface, this policy seems like a good thing for workers, which is usually bad for the company's bottom line. I don't understand enough about it say it is a good or bad decision.

[BigRedBuster]

 

We have been dealing with these new laws for the last 4-6 months trying to figure out what the hell we are going to do. We have been waiting for the final ruling on the regulations and it appears they haven't alleviated any of our concerns.

 

We have probably 3-5 employees that we have absolutely no clue what we are going to do with. It is virtually impossible to keep their job the way they have been doing it and abide by these regulations. Sad thing is, they like how they currently are employed and they very well may NOT like what needs to change.

 

This is one area that the government had absolutely no friggen clue what they were doing when they put these rules in place.

 

I will guarantee you that a year from now, if these stay in place, you will be able to walk into just about any midsize or larger company and find violations and the company probably thinks they are abiding by every rule possible.

 

Friggen idiotic.

Not sure how much your willing to share, but I'm curious.

 

How many hours a week do your employees work that will be affected? And what type of positions are they?

 

My understanding was these jobs would include people who are salaried, but work more than 40 hours to avoid overtime. I had a job similar to this right after college. I was inside sales for a electrical wholesaler. I would work 9-10 hours a day but only compensated for 40. However, at the end of the year I was able to participate in profit sharing, which made up for the hours and then some. (but these profits were, in part, because we saved money on payroll) I was fortunate to be part of a profitable company.

 

On the surface, this policy seems like a good thing for workers, which is usually bad for the company's bottom line. I don't understand enough about it say it is a good or bad decision.

 

Here is one example.

 

I have a woman who works for me from home. She takes care of some internet and IT stuff. Both of us are very happy with the set up. She is at home with her kids and she doesn't have to pay child care. There are times of the year that she may only work 10-20 hours per week. She also does one project a year where she will put in more than 40 hours a week but that might be for a month or two a year.

 

So, for most of the year, on average, she is getting an extremely high hourly rate of pay. It averages out some for the couple months she works on the large project.

 

She is very happy. In fact, she is the one that came to me with the proposal of how she would work.

 

Now, she is supposed to be salary/non-exempt. So, how the hell do I manage someone from home on an hourly basis. AND....if I put her on hourly, there is going to be much of the year where she doesn't make very much. Sure, two months she makes quite a bit.

 

Also, let's say I trust her to put down her actual hours. The next person I hire for a similar job might be a total jerk and not be honest about the hours he/she is working.

 

So, honestly, my best option might be to bring that position back into the office which would greatly affect her job and lifestyle.

 

Again...I stress....She is very happy with the pay and set up. But, these regulations are not going to allow it to continue the same way.

[BigRedBuster]

How do you handle a salary/non-exempt employee when they travel? This person may not travel very much but a few times a year they go to a trade show where they will be at the show all day and then go out to eat with a customer. After supper maybe they go out to a bar till late. This person is salary/non-exempt. How do I handle the hours worked in that situation? Are they on the clock the entire time they are with the customer because they are actually also good friends? Do I tell him he isn't allowed to go out late with the customer because that would mean he is still "working"? If I don't do that, am I required to pay him over time pay for every hour he is out with the customer?

[BigRedBuster]

I have another employee who has always been in the office and salary. A few years ago, he wanted to get into more sales so I put him as a retail sales person who goes out and meets with customers. This is on top of his previous job. So, we kept his salary and added a commission on top of that. Everyone's happy.

 

BUT...now....with the really screwy rules that apply here, I can't call him a "retail sales person" because not a high enough percentage of our sales are "retail". WTF does that have to do with anything?

 

The way it's been explained to me is that now I will be required to pay him over time pay on time he spends going out and doing quotes on jobs he is ultimately going to get a commission on.

[BigRedBuster]

Now...admittedly, we haven't fully studied the final rulings and maybe things have changed since it has been originally explained to me. We will have to study it and move forward.

[cm husker]

A silly, overly complex to set of rules that will now cost more money to enforce and result in more litigation.

 

I see why Scalia and others have found this "regulatory legislation by federal rule" so dangerous to our system.

[cm husker]

I have another employee who has always been in the office and salary. A few years ago, he wanted to get into more sales so I put him as a retail sales person who goes out and meets with customers. This is on top of his previous job. So, we kept his salary and added a commission on top of that. Everyone's happy.

 

BUT...now....with the really screwy rules that apply here, I can't call him a "retail sales person" because not a high enough percentage of our sales are "retail". WTF does that have to do with anything?

 

The way it's been explained to me is that now I will be required to pay him over time pay on time he spends going out and doing quotes on jobs he is ultimately going to get a commission on.

And it sounds like the solution to that will be similar to the one where an employer simply pays less per hour to offset the overtime hit. In your case, you'll have to consider cutting the commission. that must be extraordinarily frustrating for you and your employee.

 

This stuff is so misguided. Employers can (and will) "zero out" pay structures to account for this (or cut hours, leading to less productivity), but labor activists are simply hoping that it will be unacceptable for an employer to cut hourly wages (or commissions in your case). I think that's a terrible misjudgment on their parts.

[cm husker]

Oh, and just to add insult to injury, these rules make it that much harder for low cost of living areas, such as rural, small population states and inner city, depressed communities, to compete.

 

One size fits all "solutions" for a country of 300 million are just silly.

[It'sNotAFakeID]

Oh, and just to add insult to injury, these rules make it that much harder for low cost of living areas, such as rural, small population states and inner city, depressed communities, to compete.

 

One size fits all "solutions" for a country of 300 billion are just silly.

 

Isn't that the truth. Just seems like something where government needs to enforce and legislate common, overarching business/employment law, but that's about it. Not to mention, BRB, that your changes in pay structure or even job structure (you mention having your one employee come into the office) is going to have consequences for their job satisfaction, which is related to a host of negative business outcomes (turnover).

 

Now, I'm all for paying workers overtime pay for hours worked overtime, but this seems a bit...much.

[teachercd]

Hopefully the firemen will somehow get more money out of this.

[huKSer]

Had a superintendent who claimed that "teachers are on duty 24/7" when dealing with a personnel issue.

 

We immediately asked to be paid hourly at minimum wage.

 

He no longer is employed here.