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Overtime update: New overtime laws being rolled out soon

By Forrest Flinn

1-15 Forrest Flinn blogLast year in May I published a blog on PSB’s website called “New Overtime Changes Coming to a Dealership Near You.” 

Now a year later things are progressing and the changes aren’t something that is in the distant future in fact they are coming within the next 90 days!

In March of this year, the Department of Labor (DOL) forwarded its proposed/final regulations onto the Office of Management and Budget (OMB) for final review and approval. This is technically the “next to the last step” in the regulatory process before they are considered final and published in the Federal Register as law.

The OMB at this point has only 90 days to finish its review of the new regulations. After the OMB gives its final approval implementation can take as little as 60 days. This means that by June of this year we could have new federal laws which govern how we pay our dealership employees for the contributions that they make to our businesses.

So what do you do now? Time is ticking and its time to get ready for your dealership to be compliant. Below are seven steps that you can take to get ready for the new overtime laws that are coming this summer/fall.

  1. Identify those employees that need to be reclassified. Pay special attention to those who make under $60,000 because this is where misclassifications tend to happen.
  2. Design new compensation plans for those affected employees. If you reclassify an employee from exempt to non-exempt you are going to have to develop new pay plans. Dealers need to compare the costs of giving pay increases to employees who are currently exempt from overtime but make less than $50,440 per year against the costs of reclassifying those employees as nonexempt and paying them overtime. Take into account the given number of hours those employees are currently working in your comparison.
  3. Review your dealership’s wage and hour policies. If you find yourself reclassifying employees from exempt to nonexempt status, now is the perfect time to review your dealership’s wage and hour policies. The most important part of this review is to make sure you have the appropriate time-tracking systems in place. Some dealership employees may be offended because now they have to “punch a clock” so anticipate and prepare for any pushback on that issue.
  4. Communication is key! Make sure you communicate any and all changes with those that are affected by the reclassification from exempt to nonexempt status and explain the business need for it.  Make sure you communicate with them during every stage of the process.
  5. Train your staff on new reclassifications. Make sure you train your newly reclassified employees and their managers. Some dealership staff do not understand exactly what your dealership’s policy is on overtime or what constitutes compensable time. Make sure your managers understand what could be considered a compliant that could trigger a retaliation claim under the FLSA reporting standards. Some of you are very leery of talking about these issues because we don’t want our staff to understand the legal environment of running a business. Taking the time to train your managers could save you a lot of time and money in the long run.
  6. Consider whether regular bonuses can count toward the minimum salary level. The Department of Labor may allow employers to count nondiscretionary bonuses and commissions to satisfy up to ten percent of the minimum salary level. For example, if you have a parts manager making a $45,000 salary and earns $8,000 in commissions could still be exempt from overtime payments. But keep in mind that the DOL will only permit bonuses or commissions paid monthly or more frequently.
  7. Make sure you understand the duties test. The proposed rules have left the current duties requirements as they are. However but the DOL has sent signals that it might tighten the rules and make them more strict and less open to interpretation. Under the current rules dealerships do not need to pay overtime to employees that spend the majority of their day performing nonexempt duties such as taking inventory, performing end-of-day procedures as long as they are free from oversight on the management portion of their job responsibilities.

One dealer recently told me that the federal government is not looking at small businesses such as motorcycle dealerships. He thinks the DOL is only focusing on larger corporations. This thought process couldn’t be further from the truth.

Both federal and state agencies are looking at all businesses, including motorcycle dealerships, to enforce overtime laws. By taking no action on this issue in your business you are running the risk of both lawsuits by your employees as well as investigations by the government. Both of these will eat up a lot of your time as well as being financially devastating. How many more motorcycles do you have to sell to cover the cost of let's say $100,000 in penalties and back pay?

In summary, the new laws are going to be finalized this summer and implementation of the new overtime laws will be implemented within 60 days of final approval. Make sure you educate yourself to protect your dealership. And as always please consult your legal counsel to make sure that you are in compliance with both state and federal over-time laws. Often there are free resources available to you through the companies that process your payroll.

Technical Source: XpertHR

Forrest Flinn, MBA, PHR, SMS has been in the motorcycle industry for nearly 20 years and has been a true student and leader serving in various capacities. He previously worked as an implementation consultant for Lightspeed and as a general manager with P&L responsibility for a large metro multi-line dealership. Currently Forrest is the managing partner and chief visionary for a consulting firm that specializes in outsourced accounting, human resources, social media strategy, dealership operations consulting and Lightspeed/EVO training.

Contact: forrest@powersportsmc.com

4 comments

  1. How will the DOL treat commisioned sales people? Are they considered exempt, or do we have to convert them to hourly?

      [Reply]

    • Hey KJ....you can email me at forrest@powersportsmc.com with your specific questions. The focus of this new legislation is on salaried managers. We can thank POUTUS for this. Anyway---historically people who are paid a salary are exempt from overtime---if they meet the criteria/tests specified by the DOL. Many people misclassify employees as salary to skirt overtime payments. This new legislation is aimed at solving those problems. You question is interesting as some dealerships do not feel that commissioned sales people are not subject to overtime. However I have two clients that went through Wage and Hour audits where the ruling was that they are. Always check with your legal counsel and or the Wage and Hour people to make sure that you are in compliance with state and federal laws.

        [Reply]

      • ALSO----lets say that you pay your employee $10 per hour and they earn a $40 commission. Lets say they work 42 hours in a pay period. Not only is the 2 hours subject to overtime, but so is the commission. Keep in mind that your state may be different than the feds. The general rule of thumb is you have to follow the rules that benefit the employee more. So many people out there are not taking the commission into account when calculating overtime.

          [Reply]

        • My best advice to your question is call the Wage and Hour division of the department of labor.
          Here is one link I found interesting. The lady I spoke to was very friendly. It appears there are special rules that govern automotive dealerships---which powersports may be classified under which provides for exemption status under overtime regulations.

          The following link is for retail establishments. https://www.dol.gov/whd/regs/compliance/whdfs20.pdf

          I tried to access the automobile regulations but the link said that is being revised and coming soon.

            [Reply]

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