Last year, the U.S. Department of Labor (DOL) proposed changes to the minimum salary requirements (an increase in the minimum threshold from $455 to $913 a week) which would have resulted in some salaried workers becoming eligible for overtime who had not been previously eligible because they earned a salary over $455 per week. Rather than give salaried workers a raise and maintain the exemption from overtime, many employers transitioned their salaried managers and supervisors to hourly.
By doing so, they may have thought they were saving themselves some money by not giving these employees raises to meet the new threshold of $913 per week. This cost-saving measure may have had unintended consequences. By becoming hourly employees, these individuals became eligible for time and a half (1.5 times their regular pay rate) for all hours worked over forty hours in a workweek regardless of their hourly rate because they were no longer paid a salary which is a requirement for the overtime exemption.
Although current Secretary of Labor Alexander Acosta has publicly stated that the overtime salary threshold would be less than the $47,476 ($913 per week) threshold proposed under the Obama Administration, he has recommended that the minimum salary level should be increased. After all, the current threshold of $23,660 ($455 per week) hasn’t been increased since 2004.
Employers Reclassifying Employees Ahead of a New Overtime Rule
Unfortunately, because many employers made the preemptive switch and reclassified some of their employees from exempt to nonexempt status prior to the November 2016 injunction on the proposed Obama overtime rule, these individuals are not guaranteed a salary as they were previously as exempt workers. So if there’s not as much work for them, they may have to work fewer hours in a week and will only be paid the hours they work.
On the other hand, there are instances in which their employers are asking them to work more than 40 hours a week and not paying them time and a half, which they are guaranteed under the Fair Labor Standards Act (FLSA). Practically speaking, the manager’s job did not change. The manager is probably still being asked to do the same work as before the switch to hourly paid. Rather than allowing their work to suffer, many managers will simply work off the clock as requested to get the job done. These hourly paid managers are entitled to overtime pay and many are not being paid that overtime which has been earned. In some instances, the company may not realize they have failed to pay these managers properly but in others it is clear that the failure to pay overtime is a willful violation of the law- an effort to avoid the increased costs of overtime work. Many managers are afraid to complain out of fear of retaliation.
Conversely, some employers raised their employees’ salaries or adjusted their work hours so that they wouldn’t have to pay them time and a half. In addition, once the injunction put a stop to the new overtime regulations, other employers reversed course and took away the raises they instituted. Although these policies are unfair to employees, employers are legally entitled to make these changes.
What Does the Future Hold for the Overtime Rule?
Secretary of Labor Acosta has suggested that the overtime salary threshold should be somewhere around $33,000, which would account for the inflation rate and the increased cost of living since 2004. However, there are regions of the country where a higher overtime threshold would put more of a burden on employers due to lower cost of living.
What’s more, there are many advocates for further modification of the overtime rules to eliminate the “salary-basis” overtime requirement altogether in favor of focusing on a particular job’s duties in determining exempt or nonexempt status. Some employment law defense firms have suggested that the DOL should eliminate the “salary basis” and “salary requirements” and instead consider employee’s’ overall compensation in relation to that of non-exempt employees.
Regardless of what happens with the overtime rule during the coming months, employees, particularly managers and other salaried employees who were switched to hourly, should ensure that they are paid in accordance with current DOL’s overtime regulations. Hourly paid employees should:
- Examine whether they are truly exempt or nonexempt from overtime provisions regardless of the conclusions the employer may have reached.
- Review their own time records to see if they are being paid for all hours worked in their new hourly paid roles.
If you feel as though your employer has misclassified you as exempt or is not paying you the overtime wages you have earned, contact Wenzel Fenton Cabassa, P.A., today. Our initial consultation is free, and we can help ascertain whether you are entitled to overtime pay under the Fair Labor Standards Act.