BY FORREST FLINN
In the past few years, I have blogged about future changes coming to the federal overtime rules as outlined in the Fair Standard Labor Act (FSLA). That was a few years ago, and we all know how the government moves. Well, on March 7, 2019, the Department of Labor (DOL) has issued a proposed rule that could make the way you pay your employees more costly because of new overtime regulations. The DOL is currently in the final stages of formulating the new rules and below are a few highlights of the newly proposed legislation.
These new rules aren’t anything new. As I stated before, I have blogged about them before and nothing happened, right? Well, under the newly proposed rules, and after receiving final confirmation, the proposal would increase the minimum salary required for an employee to be considered exempt from overtime. Under the current regulations that amount is $455 per week ( $23,660 per year) and it will be changed to $679 per week ($35,308 per year). That means that if your employee makes under $35,308 per year, then they could be entitled to overtime for hours worked over forty.
Also under the proposed rule, non-discretionary bonuses and incentives, including commissions, may be used to satisfy up to ten percent of the salary level. For example, if you have a parts associate that is on a salary of $30,000 and receives $18,000 in commissions throughout the year, then that employee qualifies for overtime. The reason why is that, under the proposed new rule, only ten percent of the $18,000 of commissions can be used to satisfy the minimum salary requirement of $35,308. Does not seem fair, right?
When evaluating your options, please remember that just by putting someone on a salary doesn’t make them automatically exempt from overtime, even if you set the salary at the new benchmark or higher. Also keep in mind that to be exempt from overtime, the employee's duties must be primarily executive, administrative, or professional as defined by the regulations of the federal government. Employee classification is at the very foundation of the new rules. Currently, the newly proposed rules have not changed the duties tests that have been used in the past to determine exempt status.
What not to do?
Do not, I repeat myself, do not, ignore this blog. As mentioned above, the new overtime rules are in their final stages to becoming law. At the time of this writing the new changes are pending final approval, and then the proposed regulations will be listed in the Office of the Federal Register (OFR). After publication in the OFR, the public will have 60 days to comment on the regulations. After this point, the rules become final.
Get yourself prepared for the final overtime regulations. Do not try to game or manipulate the system to your advantage. By not being in compliance with the federal rules on overtime, you open yourself up to penalties and fines. Claiming ignorance is not a solution, either.
When in doubt of your individual situation, always consult with the Department of Labor or an HR professional for guidance or clarification.
After all, it is just good business.
Forrest Flinn, MBA, PHR, SMS has been in the motorcycle industry for more than 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.