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This week, the Department of Labor (DOL) released a Request for Information (RFI) to gather additional feedback from the public on the overtime regulations, which define and delimit exemptions from the Fair Labor Standards Act’s minimum wage and overtime requirements for certain executive, administrative, professional, outside sales and other employees.
The rule, released under the Obama Administration, would have doubled to $47,000 the maximum salary a worker can earn and still be eligible for mandatory overtime pay under federal wage law, and was supposed to take effect in December 2016. However, it was blocked by a judge and a group of 21 states and business groups challenged the rule in a lawsuit filed last year.
The RFI includes questions about the role the duties test plays with respect to the salary threshold, what is the proper methodology, and whether there should be multiple salary levels to reflect different regional economies, sizes of employers, and exemptions.
From the initial release of the overtime rule, IPC had serious concerns with it. These included:
1. Compression on Other Exempt Classifications
The impact of the overtime rule will affect many of our members’ broader employee population as compliance will force compression on other exempt classifications. In other words, companies will need to raise the wages for many others as a result to preserve differentiation in compensation. This will have a significant impact on overall cost structure and international competitiveness as our members compete globally and are under constant pressure to lower costs.
2. Flexible and Unusual Work Hours
Many employees in our industry with exempt classifications work unusual hours due to the global nature of our industry. Employees willingly work these hours on behalf of the company and their own future careers. These are not “clockable” hours, which of course, leads to the reason for their exempt classification. Furthermore, the exempt classification provides employees with greater flexibility over their schedules. Rather than creating jobs, the new rule will very likely trigger a review of the mid-range jobs and if companies are better suited to limit the salaried exempt positions in lieu of hourly, and unfortunately will limit the career opportunities for many.
3. Regional Differences
Another major issue with the new rule is that it does not take into account the regional differences. Many of our members generally work with consistent salary classifications across the company, but focus on maintaining salary competitiveness in the local area of their facilities. The blanket approach by the DOL does not take these regional differences into account and neglects differentials to pay a locally competitive wage/salary.
IPC believes that the DOL effort to address job classification and overtime was well-intended, but it failed to consider the vast differences across the nation as the final rule takes a “one-size-fits-all” approach that will put significant economic strain on businesses.
IPC encourages its members who have concerns or issues with the overtime rule to review the RFI and submit comments to DOL. IPC is a member of the Partnership to Protect Workplace Opportunity (PPWO) coalition, which is dedicated to advocating for the interests of its members in the regulatory debate on changes to the Fair Labor Standards Act (FLSA) overtime regulations. PPWO will submit comments to DOL regarding the RFI and IPC plans to be a signatory with other members of the coalition. The RFI is available here and the comment period ends on September 25, 2017.