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Proposed Rule to Modify FLSA Overtime Regs

Tuesday, August 4, 2015   (0 Comments)
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Advisory from the National Association of Wholesaler-Distributors (NAW)
July 21, 2015

On July 6, 2015, the Wage & Hour Division of the U.S. Department of Labor promulgated a Notice of Proposed Rulemaking (NPRM) which would dramatically change the white collar exemption rules under which an employer determines which employees are exempt from payment of overtime. This NPRM, “Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales and Computer Employees,” includes the following proposals:

Minimum Threshold Salary Increase. To be exempt currently, workers must make more than $455/week, or $23,660 annually. The proposed rule sets the standard salary level at the 40th percentile of weekly earnings for full-time salaried workers which for 2013 was $921 per week, or $47,892 annually. If the 40th percentile approach is adopted, the 2016 level is projected to be $970 a week, or $50,440 annually. This represents a threshold salary increase of 113% per cent. Further, this one-size-fits-all salary increase fails to account for the vastly different regions in the country, and will certainly force many employees from salaried management positions to hourly-wage jobs in low cost-of-living regions.

Highly-Compensated Employee (HCE) Salary Increase. Currently, the HCE salary compensation level is $100,000. Under the proposed rule, the highly compensated employee annual compensation level would be set at the 90th percentile of earnings for full-time salaried workers, now $122,148.

Salary levels to rise automatically. The Department of Labor proposes to automatically update both the salary and HCE thresholds on an annual basis using either a fixed percentile of earnings for full-time salaried workers or based on changes in inflations (specifically CPI-U). The proposal to index these thresholds is unprecedented in the 77 year history of the Fair Labor Standards Act (FLSA).

Further of note in the NPRM:

Duties Test. In addition to the minimum salary threshold, there is a duties test that can be used to determine if an employee is exempt from overtime. The Department does not propose any specific changes to the duties test in the NPRM, yet it clearly states that the final rule may well include changes. 

Nondiscretionary Bonuses. The NPRM makes no proposal to alter the treatment of nondiscretionary bonuses. Nevertheless, stakeholder comment is requested regarding the possibility of including nondiscretionary bonuses to satisfy a portion (10%) of the standard weekly salary level. Similarly, the Department does not propose to make any change to the treatment of commissions in meeting the standard salary requirement, but invites comment on the appropriateness of doing so.

Outside and Inside Sales. The NPRM proposes no changes in the treatment of outside sales employees (statutorily exempt) or inside sales employees (generally non-exempt). Retaining the statutory exemption for outside sales personnel is of critical importance, and since the NPRM does note that the Department has the right to define each category of exemption, this is an area to watch.

Public comment period and requests for extension

The NPRM requests comment from stakeholders on not just the specific minimum threshold and HCE salary levels, but also on two alternative proposals for automatically increasing those salary levels. Further, the NPRM makes no specific proposals for modifications in the duties test, yet invites public comments on the test and makes clear they may propose modifications in the final rule.

Associations will obviously need to determine how the minimum salary threshold, HCE salary and possible changes to the duties test would impact their industries and members. Despite the time and effort that will be required for stakeholders to address the broad and complex NPRM, the Department provided only 60 days for public comments to be filed; the 60-day window closes on September 4, 2015.

Both NAW and the Partnership to Protect Workplace Opportunity (PPWO) believe the 60-day comment period is far too limited given the sweeping scope of the changes in the standard salary and HCE thresholds, and the failure of the Department to make a specific proposal regarding the duties test while nevertheless holding open the possibility of enacting changes in the final rule. 

Consequently, both NAW and the Partnership (NAW serves on the Partnership’s Management Committee) directed letters to the Department requesting a 60-day extension of the public comment period.

If you are also concerned about this proposed rule-making and its impact on your members, please join the effort to get the deadline for filing comments extended. It’s a simple process to submit a letter to the Department of Labor requesting an extension.  Please feel free to use previously-sent letters as a template for your submission.
 
To read NAW’s letter, go to:
http://www.naw.org/files/Letter-DOL.pdf

To read PPWO’s letter, go to:
http://www.naw.org/files/Letter-DOL-SeyfarthShaw.pdf

If you want more information on the NPRM, DoL has a website with information on the initiative and a link to the full NPRM.  Go to:
http://www.dol.gov/whd/overtime/NPRM2015/

If you send letters, please copy NFDA at nfda@nfda-fastener.org  


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