DOL Projects Increase in Salary Threshold for White-Collar Exemptions - Essay Sample

Introduction

The Department of Labor projected in its fall regulatory control issued December 14, 2017; the department said that it would announce a recommended overtime rule by October 2018 (Martins & Saraiva, 2020). The Department of Labor was expected to increase the salary threshold for white-collar exemptions (Dyer, 2020). The Society previously recommended the rise in the salary threshold for Human Resource Management (SHRM). They urged the increase from $23,660 to approximately $32,000 annually. However, the overtime rule of the Obama administration was halted during the Trump administration (Martins & Saraiva, 2020).

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The United States Department of Labor (DOL) had a final rule which was too into effect on December 1, 2016; however, due to a court-issued injunction and administration change, it never happened (Wiggins, 2020). Recently, the Department of Labor updated a new version that is to go into effect on January 1, 2020 (Persaud, 2020). The Department of Labor has updated employment laws. The new rules determine which employees to be paid at least minimum wage, be paid sick leave, earn overtime pay, and receive other compensation under the new proposed overtime laws. The changes will impact executive, administrative, and professional (EAP) employees as well as outside sales personnel and computer professionals (Wiggins, 2020). Therefore, the company would like to inform all the employees on the updated and proposed overtime rule, how it will affect both the company and the employees, and how the company will address the issue when the time comes.

Changes to these rules mean that various companies will have to provide overtime, paid sick leave, and proposed minimum wage to some workers who were earlier treated as exempt. In other cases, companies may want to raise the salaries for exempt workers.

The new proposed rules made some changes that were not expected, maintained quo status in the sections that were supposed to change; the Department of Labor projected that the increase in the salary thresholds would heighten wages for nearly 1.3 million United States employees (Persaud, 2020).

The New Proposed Overtime Rule

The federal law treated salaried employees being paid at least $455 per week (and meet specific white-collar privilege requirements) as exempt from overtime (Persaud, 2020). Since 2004, employees had to meet both the salary and a duties test for them to be exempt from overtime. Meaning, employees receiving a base salary of at least $455 per week did not qualify for a white-collar exemption and had to be paid both minimum wage and overtime (Persaud, 2020).

However, under the new proposed overtime rule, the salary threshold will increase to $684 per week. The new law also permits employers to provide up to 10% of the regular salary basis with nondiscretionary bonuses, commissions, and incentive payments provided that such kind compensations are paid quarterly (Persaud, 2020). The increase in salary threshold means that as from January 1, 2020, workers earning less than the new threshold salary who were earlier treated as exempt from overtime will no longer be treated as exempt (Martins & Saraiva, 2020). Again, under the new rule, employees classified as highly paid employees will earn at least $107,432 (as compared to the current $100,000) in total annual earnings (Persaud, 2020). However, those who work in non-manual labor jobs will be automatically exempt from overtime.

What Remains the Same. Department of Labor did not change any of the duties tests despite the speculations that the new rules could also adjust the white-collar exemptions' duties alongside the salary test. As directed by the regulations, to qualify for the white-collar exemption remains consistent. Worker's job duties will still primarily involve professional tasks, executive or administrative.

Next Step. This new overtime rule does not provide automatic updates as was with the final rule released in 2016. Although the 2016 law had proposed a mechanism for an automatic update, the current salary thresholds had been used since 2004 (Osland, 2020). However, no such strategy is included in the new rules, so the 2020 thresholds will go into effect indefinitely (Osland, 2020).

How the Company Will Address the Proposed Overtime Rule

The company will identify any exempt workers with compensation below the new threshold salary level; the company will increase those employees' compensation to the new threshold amount or treat them as non-exempt after January 1, 2020 (Osland, 2020). However, due to the new overtime rule's impact, the company will first analyze the structure of the workforces and the compensation rules in light of the potential for increased labor costs. For instance, the company will weigh whether starting to pay more overtime for the employees will be costly than increasing the salaries to meet the new threshold (Dyer, 2020). The company may also consider hiring more staff or restructuring specific aspects of the workforces to evade overtime expenses. Again, the company may want to reconsider increasing fixed salaries or decreasing equity payments, bonuses, or commissions to enable it to meet the higher salary demand.

Secondly, the company will take appropriate measures to ensure the white-collar exemption are productive and effectively managed; this will include workers with salaries higher than the threshold. However, the employees are reminded that wages that meet the limit do not guarantee an employee exempt from overtime. Apart from the proposed overtime rules, there will be special tests for administrative, professional, outside sales personnel, executive and highly compensated worker exemptions; this will depend on the duties performed by those employees (Osland, 2020). The specific tests in question have existed and evolved with time; the recent court rulings just refined and narrowed their application.

Although the new overtime rule does not alter those compliance tests, the company would be well-advised to take this chance to assess whether the workers are suitably defined under the current versions of the compliance tests. The company will then use this change as an opportunity to establish the needed reforms. Before that, the company will consult with their counsel and estimate a wage and hour audit to resolve if the current compliance tests comply with relevant federal and state laws concerning overtime pay.

The third step is that the company will ensure that it complies with applicable state wage laws, which is different from federal law. These state wage laws will not automatically change, although federal law does. For instance, salary thresholds to treat workers as exempt from overtime in New York and California are higher for companies with a specified minimum number of employees than those set by the final rule or the proposed overtime rule (Osland, 2020).

Generally, the company shall review the compensation arrangements for compliance with the proposed overtime rules. Also, the company shall consider and analyze the overall compliance with wage and hour laws. The employees will be further updated on the measures the company has resolved to comply with proposed overtime rules.

References

Dyer, B. (2020). Creating Good Jobs: An Industry-Based Strategy. MIT Press. https://mitpress.mit.edu/books/creating-good-jobs

Martins, P. S., & Saraiva, J. (2020). Assessing the Legal Value Added of Collective Bargaining Agreements. International Review of Law and Economics, 105904. https://doi.org/10.1016/j.irle.2020.105904

Osland, A. (2020). Move to Unlimited Vacations or Remain With Defined Vacation Policy?.http://sk.sagepub.com/cases/move-to-unlimited-vacations-or-remain-with-defined-vacation-policy

Persaud, A. (2020). Just A Minute, Isn’t That De Minimis: California Should Not Burden or Require National Employers to Compensate Employees for De Minimis Off-the-Clock Work Activities. FIU Law Review, 14(1), 121. https://ecollections.law.fiu.edu/cgi/viewcontent.cgi?article=1421&context=lawreview

Wiggins, M. F. (2020). Farm labor and the struggle for justice in the eastern United States. In Latinx Farmworkers in the Eastern United States (pp. 227-251). Springer, Cham. https://link.springer.com/chapter/10.1007/978-3-030-36643-8_9