DOL Delays Important Ruling

We HR folks have been waiting on a ruling that was expected to come late this year or early 2016. The issue is the salary test for most Fair Labor Standards Act exemptions. The Department of Labor proposed some important changes to overtime laws in June and closed its comment period on those proposed changes in September. The new rules were expected to become law in the first quarter of 2016, but fortunately for small and mid-sized employers, the DOL has delayed announcing the final rule until late 2016.

The DOL received approximately 270,000 comments on the topic, giving them pause to consider the impacts of their proposal a little more thoroughly. There is likely an election-year political component to the delay as well.

The DOL is primarily targeting employers who "promote" people into jobs with management titles, but still require them spend the majority of their time performing non-exempt duties. Picture a cook who's making $10/hour working 40 hours per week at a restaurant. He gets "promoted" to assistant manager and gets what he thinks is a nice raise to a salary of $500 per week. But now he finds himself working 60 hours per week, and spends most of them cooking, just like he did before. The employee thinks he got a raise, but his effective hourly rate dropped to $8.33. These are the abuses that the DOL is trying to curb.

Unfortunately, their proposal also affects millions of small company office managers, department managers, and non-profit agency employees who currently earn a salary between $24,000 and $50,000 and work extra hours occasionally because they are engaged employees who are committed to their organizations. The DOL proposal as it stands today will force them into punching a clock rather than allowing them to work a flexible schedule as they are used to now.

It's a shame that the DOL still operates as though our economy is dominated by manufacturing jobs. The current rules work pretty well for people who show up at a plant and are either clearly on the clock or clearly off. But they simply don't work very well for many organizations in a service economy with constant connectivity. Unfortunately, bad employers who abuse employees to improve productivity have created the need for reform. Many HR professionals wish the DOL would revise the entire FLSA to make it work better for service providers, but they've chosen to continue to put band aids on 1930s legislation.

I'm still advising my clients to have a plan in place for the new rules, even though it will be late next year before they are released. The only thing likely to change is the final salary test number.