Below please find information on the association community response to President Obama’s new overtime rule. The final rule was released May 18, 2016.
Below please find a client alert and backgrounder from ASAE’s general counsel firm Pillsbury LLP with 9 changes associations can make now to prepare for the December 1, 2016 implementation date: Pillsbury Client Alert
Overtime Rule Released: How Organizations Can Prepare
May 23, 2016
Five Changes Associations Can Make to Prepare for the Final DOL Overtime Rule – Best practices prepared by ASAE’s general counsel firm Pillsbury LLP
ASAE Grassroots Piece – May 18, 2016
Earlier today, the White House announced the publication of its final overtime rule, which the Administration says will extend overtime eligibility to more than 4 million additional workers within the first year of implementation.
The rule, which will be effective December 1, significantly increases the minimum salary level for “white collar” employees to qualify as exempt from overtime pay requirements. Under the new rule, no employee who has a guaranteed salary of less than $47,476 will qualify as exempt under the executive, administrative, or professional exemptions. That’s more than double the current minimum salary level of $23,660 and only slightly lower than the Labor Department’s proposed $50,440. The rule will not affect hourly or other non-exempt workers, who already are eligible for overtime pay.
Additionally, the final rule includes a mechanism for automatically updating the salary threshold every three years (a change from the proposal of yearly adjustments). The next automatic update to the salary threshold would be on Jan. 1, 2020, and the new salary level will be announced 150 days before it takes effect. The minimum salary level is set based on the 40th percentile of wages of full-time salaried employees in the lowest wage Census region (currently, the South).
If you are concerned about the impact of the overtime rule on your organization, we strongly urge you to contact your elected representatives in Congress and share how this change will affect your association’s bottom line and ability to carry out your mission. Click here to access ASAE’s Engage portal to send a message to your legislators.
Importantly, the Labor Department decided not to make changes to the “duties test,” part of the three-pronged test for establishing exemption from overtime eligibility. In a draft rule released last year, DOL hinted that it might limit the definition of “primary duty” to duties on which an exempt employee spends 50% or more of his or her working hours. In many situations, that would have meant that employers would need to track the hours and tasks of exempt employees to ensure that they had accurately identified the employee’s primary duty. So with no changes to the duties test, the basic test for determining who in your organization remains exempt from overtime eligibility under the executive, administrative, or professional exemptions is as follows:
– The employee must make over the new salary threshold of $47,476;
– The employee must be salaried;
– The employee must perform exempt duties (executive, administrative, or professional).
In reviewing the final rule, ASAE continues to believe that the salary threshold is set too high, and that the minimum salary level for exempt employees should instead be keyed to government data on regional cost-of-living differences. Nonprofit employers, colleges and universities, retail and restaurants are among the entities likely to be hit especially hard by this drastic expansion of overtime eligibility. The Labor Department has prepared a fact sheet confirming that there is no exemption from overtime requirements for nonprofit employers. The fact sheet does outline some options for nonprofit employers to comply with the new salary threshold. In addition, the DOL has stated that, as an enforcement policy, it will consider many graduate and undergraduate research assistants and administrators at colleges and universities as exempt. More information on that enforcement policy can be found here.
ASAE had shared its concerns extensively with the Labor Department and the Office of Management and Budget prior to the release of a final rule, but will now shift its focus to a potential legislative solution from Congress. Because President Obama has signaled a willingness to veto any attempt to block enforcement of the final rule, any legislative solution is likely to be successful only if it has broad support from Congress.
For more information about the overtime rule and how organizations can prepare before the Dec. 1 effective date, visit our Power of A site at http://www.thepowerofa.org/2016/05/final-dol-overtime-rule/.
ASAE will continue to work toward a legislative solution to keep DOL’s overtime rule from taking effect in December, and will continue to share updates on this important issue as they become available. If you have questions about this issue, please contact ASAE’s Public Policy team at email@example.com or call 202-626-2703.
ASAE DISCUSSES OVERTIME RULE WITH ADMINISTRATION
April 28, 2016
ASAE met April 26 with officials from the Office of Management and Budget (OMB) and Department of Labor (DOL) to discuss the Administration’s forthcoming rule on overtime pay.
The DOL’s overtime rule – barring any changes before it’s finalized this year – would require businesses to pay overtime wages to employees making $50,440 or less per year, which would be a 113 percent increase over the current threshold and would make an additional 5 million workers newly eligible for overtime pay. In March, the Department of Labor sent the rule to OMB for a final review and Administration officials say the final rule could come as early as next month.
ASAE President and CEO John H. Graham IV, FASAE, CAE, and a delegation of other nonprofit leaders shared their mutual concern that the new rule would adversely affect many nonprofit organizations and other employers with limited revenues, and could harm many affected employees as well. ASAE has contended in public comments to the Labor Department that the $50,440 salary threshold amounts to a “one-size-fits-all” solution and that the minimum salary level for exempt employees should instead be keyed to government data on regional cost-of-living differences.
The Administration’s plan to drastically expand overtime eligibility has emerged as a top concern for small businesses, colleges and universities and tax-exempt organizations – many of which are struggling to see how they will afford a surge in payroll costs and still maintain their bottom line. As ASAE has pointed out, the proposal also has implications for employees, who could be denied opportunities to participate in any work-related activities at which their attendance is not essential, thus restricting their professional growth.
Joining Graham in the meeting was Neal Denton, senior vice president and chief government affairs officer at the YMCA of the USA, and Ed Elmendorf, senior vice president for government relations and policy analysis at the American Association of State Colleges and Universities. Both said their members across the country would not be able to absorb the cost of expanding overtime eligibility without cutting staff, reducing hours and potentially scaling back services.
The meeting with OMB was deemed a “listening session” to help the Administration understand employer concerns before releasing a final rule. It’s not clear what changes, if any, will be made to the draft rule DOL released last year.
DOL CLOSER TO FINALIZING OVERTIME RULE:
March 17, 2016
The Department of Labor sent its highly-anticipated overtime rule to the White House’s Office of Information and Regulatory Affairs (OIRA) this week, moving a step closer to expanding overtime eligibility for millions of workers.
The details of the final rule won’t be known until it is publicly released, but the proposed rule issued last summer would require businesses to pay overtime wages to employees making $50,440 or less per year, which would be a 113 percent increase over the current threshold.
More than 250,000 organizations, including ASAE, submitted comments on the overtime rule to DOL last year. ASAE believes strongly that the new rule would adversely affect many nonprofit organizations and other employers with limited revenues and could harm many affected employees as well. ASAE said in its comments to DOL that the $50,440 salary threshold amounts to a “one-size-fits-all” measuring stick and that the minimum salary level for exempt employees should instead be keyed to government data on regional cost-of-living differences.
Labor Secretary Thomas Perez testified before a Senate Appropriations subcommittee hearing today on the agency’s FY17 budget request, and received some pointed questions about the expansion of the overtime rule from GOP appropriators, including the subcommittee chairman, Sen. Roy Blunt (R-MO).
“As the country continues to recover from the recession, it is time for the Administration to admit that government regulations and overreach do not create job growth,” Blunt said in his opening statement at today’s hearing. “I continue to have serious concerns about the Department’s aggressive regulatory agenda and methods used to short-circuit the fair and open regulatory process.”