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Labor Department issues overtime proposal

Major shift seen, could impact over 5 million white-collar staffers

Labor Department issues overtime proposal

The Department of Labor issued much-anticipated proposed overtime exemption regulations, which, as many feared, will have a very significant impact on the banking industry.

Of 51 industries considered by the DOL, the banking industry is the second most “potentially affected.”

Under the proposed new standards—read the Notice of Proposed Rulemaking here—in order for individuals to be considered eligible for the executive, administrative, or professional exemption from overtime pay, employees must be paid a salary of not less than $921 per week.

This represents a dramatic increase from the current exempt level of $455 per week. So, on a going-forward basis, unless individuals are paid at that figure or above, the courts and federal agencies would not even consider whether the position satisfies the various duties tests.

Over 5 million white-collar workers are expected to be covered by the rules, as proposed, in the first year of implementation.

The salary level is intended to adjust over time with inflation and wage rate growth. Another significant change involves the salary levels not being fixed, but being adjusted annually.

A new concept that will bear inspection in the proposed regulations involves the payment of non-discretionary bonuses and incentives. The proposed regulations contemplate that some non-discretionary bonus and incentive payments will be considered when determining whether an employee satisfies the new salary level. This concept may offset a portion of the disruption.

The Labor Department is also increasing the annual compensation level for individuals to qualify for the “highly compensated” exemption. As you may recall, that annual compensation level is currently at $100,000 per year. The proposed regulations will increase that level to $122,148 per year. That figure would also be indexed for annual adjustments.

The proposed regulations do not contemplate any immediate changes to the duties tests associated with the executive, administrative, or professional exemptions.

Many have expected that the Obama administration was pushing to get these standards implemented as soon as possible. That is apparent from the proposed regulations, in that the standards only anticipate a 60-day comment period. So the Department of Labor will solicit comments over that 60 day period, then take time to, at least theoretically, consider those comments. Then final regulations will be published.

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Based upon what we hear from Washington, it is very unlikely that the Department of Labor will make any meaningful refinements to these standards. It is very likely that these standards will have an implementation date in early 2016, pretty much as proposed.

Steve Greene

Steve Greene is managing member at Helms & Greene, LLC.  He specializes in employment litigation, employee benefits issues, and compensation matters. Greene oversees employment litigation nationally, including discrimination, harassment, retaliation, ERISA, and breach of contract actions against employers. He has worked with major corporations on overtime exemption compliance and in design of compliant compensation methodologies. He has also assisted firms in managing Department of Labor and state regulatory investigations. He worked with Marian Exall, who recently retired from her authorship of “The Human Element.”

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