Benefits & Compensation News

New OT rule likely dead, but states have a Plan B

Accepting the fact that the DOL’s controversial new overtime rule is likely dead in the water, a number of legislators are hatching plans to steal the feds’ blueprint — albeit on a state level.

Democrats in Rhode Island, Connecticut, Maryland, Wisconsin and Michigan said they plan to roll out legislation modeled after the DOL’s overtime changes.

What’s more, a number of additional states are likely to join the five listed above, according to Sam Munger, a senior adviser for the State Innovation Exchange.

One of these states is Kentucky. As KY State Representative Chris Harris (D) said about the need for changes in current overtime regs:

“I hope that we as a state look at this issue and do what we can to help.”

The salary threshold to be exempt from overtime under the FLSA in the final DOL rule is $47,476 per year or $913 per week, an increase from the current minimum salary a worker must be paid to be exempt: $455 per week or $23,660 per year.

As employers know, Judge Amos L. Mazzant, handed down a preliminary injunction put the compliance date of the new OT regs on hold and said that by increasing the OT salary threshold so significantly, it essential made the overtime-exemption test a one-factor — i.e., salary — test.

The judge said this steep increase basically eliminated the duties test for employers, which is a key part of the FLSA’s overtime exemption.

While many employers were against the DOL’s overtime changes from the get-go, most worked diligently to change their pay practices and comply with the regs.

Now, even with the fate of OT regs on life support, a number of firms have decided to go ahead with the strategies they implemented to comply with the changes.

Two examples: Wal-Mart Stores Inc. and Wendy’s Co.

The minimum wage effect

Although employers are unlikely to see changes to overtime regs on a federal level under a Trump administration, they should keep a watchful eye on what’s happening on the state level.

Changes to OT regs could take place in the patchwork fashion we’re seeing with minimum wage and paid sick leave legislation.

As we’ve covered previously, a majority of states have a minimum wage threshold greater than the rate set by the feds. And the same thing seems to be occurring with paid sick and parental leave.

Of course, a series of varying state overtime regulations could present an administrative nightmare for employers.

According to David Weil, the head of the DOL’s Wage and Hour Division, a patchwork of state and local regs would be much more difficult to deal with than a single federal threshold because:

“If you’re a company operating in all those different places, at a certain point you start saying, ‘This is nuts.'”



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