This month’s Employment Law in Focus column addresses two hot-button items that can have a direct impact on how employers pay their workers:  (1) the DOL’s proposed “final rule” addressing expanded eligibility for overtime pay; and  (2) DOL interpretations of employee v. independent contractor status.

Proposed Final Rule on Overtime Exemptions Close to Adoption

In case you missed it, the U.S. Department of Labor (DOL) proposed a new rule last summer to redefine white-collar overtime exemptions.  Simply stated, the new rule will increase the minimum weekly salary amount required for the exemption to $970/week ($50,440/year) from its current level of $455/week ($23,660/year), and the highly compensated employee exemption will increase to a minimum of $122,148/year from its current $100,000/year level.  In addition, for the first time since the Fair Labor Standards Act was adopted in 1938, the rule will automatically increase those minimum salary requirements each year based on data from the Bureau of Labor Statistics.

This means that regardless of how many employees an individual may supervise, or whatever other qualifications he or she might satisfy for an executive, administrative, professional or highly compensated employee “white-collar” exemption, the individual will not be considered “exempt” unless the higher salary level is met.  As a result, the individual must be treated as “nonexempt” and overtime pay in the amount of 1½ times his or her regular rate of hourly pay must be paid for all hours worked over 40 hours in a single workweek.

All of which translates into a simple fact:  employer overtime obligations will skyrocket, with a resulting increase in a company’s cost of doing business.  This will also dramatically increase management’s responsibility to monitor and control overtime hours – which must be paid if worked, even if unauthorized due to not having received prior permission. (Remember, though, that despite uncompromising payment obligations the law still allows disciplinary action to be imposed for working unauthorized overtime.)

The DOL submitted the proposed final rule to the Office of Management and Budget the week of March 15, 2016.  That’s the last step before adoption may occur – and despite U.S. Chamber of Commerce and other employer industry objections during the “comment” period, the new rule is expected to be issued, possibly as early as May or June with an effective date of 60 days later.  That being said, on March 17 a new bill was introduced in Congress as a last-gasp effort to block the rule’s adoption:  the Protecting Workplace Advancement and Opportunity Act (S. 2707, H.R. 4773).  As stated by one of the opposition bill’s sponsors, Sen. Lamar Alexander (R-Tenn.), “This mandate on employers will hurt the lowest paid American workers the most, by reducing their opportunities for a promotion or better job and making it all but impossible for workers to negotiate flexible schedules.”

Stay tuned . . . . . .

Written By: Ken Carlson, Constangy, Brooks, Smith & Prophete, LLP