I always seem to get questions this time of year about paying overtime or “extra pay” to exempt employees. Many departments or companies have this time of year as their busiest and want to make sure that exempt employees can earn extra monies during this time without endangering their exempt status or actually converting those employees to nonexempt. I want to refer my followers to a great blog by Bill Pokorny of Franczek Radelet written for the Wage and Hour Insights blog that answers this exact question. I hope you find it useful.
The latest on the salary increase was released today. The U.S. Department of Labor has today announced that it will publish a Request for Information (RFI), Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales and Computer Employees. The RFI offers the public the opportunity to provide information that will aid the Department in formulating a proposal to revise these regulations. The RFI solicits feedback on questions related to the salary level test, the duties test, inclusion of non-discretionary bonuses and incentive payments to satisfy a portion of the salary level, the salary test for highly compensated employees, and automatic updating of the salary level tests. The 60-day comment period for all issues raised in the RFI ends on September 25, 2017. The public may submit comments according to the instructions listed in the RFI as published in the Federal Register.
But the court case is still raging on. The DOL has decided to fight the ruling, not to defend the limits set by the Obama administration, but to defend the concept that the DOL has the right to change the salary limit. Lots of legal blogging on the topic so I wanted to include some of those blogs for you today:
As we all know the Department of Labor (DOL) has been granted another 60 day extension concerning the new OT rules, namely the salary level test. Will it be raised to $913 a week is still anyone’s guess. However, the other two tests that must be met for an employee to be exempt under the executive, administrative or professional categories…salary basis and job duties are still intact and must be followed. Our white paper this time discusses the job duties that must be met for an employee to be exempt under the professional category. We hope you find it informative.
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We all knew that when President Obama called for changes to the exempt rules under the FLSA and the Department of Labor began the process of implementing those changes that there would be challenges by Congress. The “Overtime Reform and Enhancement Act” was introduced on Friday, July 15th. The bill requires the salary level changes be done in increments and does away with the automatic updates. But does Congress have history on their side to actually challenge the new rules? If we look at history, the answer is no. History is on President Obama’s side, even for the automatic updates, which have been proposed in the past several times. Changes of the nature being done (raising the salary level) have always been under the purview of Presidents, their Secretaries of Labor and their Administrators for the Wage and Hour Division. They have however, been few and far between. The first level was set at $30 per week in 1938 under President Franklin Roosevelt and his Administrator Elmer F. Andrews. It slowly raised up over the course of the years, often with professional and administrative employees being paid more. It was increased to $55/$75 per week in 1949 under President Truman and his Administrator William R. McComb; to $80/$95 per week in 1959 under President Eisenhower and his Administrator Clarence Lundquist; to $100 per week for executives and administrative, $115 per week for professional in 1963 under President Kennedy and his Administrator Clarence Lundquist. In 1969 hearings were held again to increase the salary level. This time they would increase to $125 per week for executive and administrative and $140 for professional employees beginning in early 1970 under President Johnson and his Administrator Robert D. Moran. During the hearings it was suggested by union leaders that there be a mechanism put in place to increase the salary level automatically to eliminate the lengthy periods which normally occur between revisions, thus keeping the salaries current and meaningful. But this was not incorporated. Amazingly enough there were only two changes to the salary level since 1970. First under President Ford (begun under President Nixon) in 1975 and then again under President George W. Bush in 2004. Under Ford and Administrator Betty Southard Murphy they were raised to $155 per week for executive and administrative employees and $170 for professionals effective April 1975. Again at this time Murphy pointed out that the thresholds had last been updated in 1970 and were increasingly out of date. She referenced that the Consumer Price Index may be utilized as the basis for updating the levels but did not include it in the final proposal. The salary level remained at those rates for the next 29 years.
The issue was not ignored by subsequent presidents it just never made it out of the regulatory agenda to fruition. It was proposed in 1979 under President Carter but tabled in 1985 under President Reagan. Under President Clinton it was put forth with a target date of September, 1993 but no action was ever taken on it. It remained on the agenda but no timetable was ever set. Then under President George W. Bush and his Administrator Tammy McCutchen, a major overhaul of all the requirements for exempt employees, including the salary level tests, were implemented. The salary level was raised to $455 per week for all exempt employees and a new category was added for the highly compensated. This category had a salary level of $100,000 per year. It was during this last update that Congress actually attempted to block the new regulations. Several amendments were added to various bills calling for defunding of the Department of Labor in an effort to stop the regulations from taking place. It was not the levels that were in dispute but the overall changes made to the jobs duties tests that caused the outcry from Congress. It was felt that too many employees would lose overtime protection under the new regulations. Stand alone bills were introduced as well as hearings conducting in both the house and senate. But in the end the regulations were implemented in April of 2004. This was the final update to the salary level until the new rules scheduled to take effect on December 1, 2016.
So the new proposed legislation of the “Overtime Reform and Enhancement Act” which is attempting to delay the implementation of the new salary levels does not have history on its side. Congress normally does not and generally cannot interfere with this type of regulation. But you never know in this day and age. We will just have to wait to see which side wins. But if history is any indicator, my money is on the DOL.