DOL Holds Listening Session with SHRM on Overtime Regulation

News Updates

The U.S. Department of Labor (DOL) held a listening session with Society for Human Resource Management (SHRM) officials and members on overtime regulations, which the Labor Department is considering amending, on May 20, 2014.

On March 13, 2014, President Barack Obama directed the Labor Department to “propose revisions to modernize and streamline the existing overtime regulations.” In the memo calling for regulatory action, Obama noted that “regulations regarding exemptions from the [Fair Labor Standards Act’s (FLSA)] overtime requirement, particularly for executive, administrative and professional employees (often referred to as ‘white collar’ exemptions) have not kept up with our modern economy. Because these regulations are outdated, millions of Americans lack the protections of overtime and even the right to the minimum wage.”

SHRM President and CEO Henry G. “Hank” Jackson noted that the rules are now 10 years old and “in a rapidly changing economy, it makes sense to revisit the rules periodically to make sure they are still responsive to the needs of the workplace.” He also observed that the single most asked question to SHRM’s HR Knowledge Center is whether an employee is exempt or nonexempt from FLSA overtime requirements.

Jackson cautioned, though, that the Labor Department should not make the rules more complicated or difficult to administer.

Concerns About Revisions

Several SHRM members are concerned that it would do just that.

For example, Eric Oppenheim, chief operating officer and franchisee of Republic Foods Inc. and co-chair of SHRM’s Labor Relations Special Expertise Panel, commented that if the salary-basis test is doubled or significantly increased, half of salaried managers would be exempt while half would be nonexempt.

Nonexempt managers would be given fewer tasks and have less opportunity to move up the professional ladder, according to Oppenheim.

Deb Horne, director of human resources for CMC Rescue Inc., noted that in her experience employees want to be considered exempt. She has had six employees request to be classified as exempt after they were told their job required them to be classified as nonexempt. Attaining a professional exemption is often viewed as reflecting increased status and removing that exemption can negatively affect employee engagement.

Lee Ruiz, vice president and associate general counsel with Ryan LLC, noted that if the rules are changed in a way that results in more employees being classified as nonexempt, fewer employees will be able to take full advantage of Ryan’s flexible work options. And, in turn, Ruiz worries about employee morale.

Joan Rodriguez, HR manager, compensation and HRIS with Lakeland Regional Medical Center, was concerned about potential changes to the duties test, noting that the mix of duties an exempt employee performs vary from day to day and shift to shift. For example, an environmental supervisor who normally works days and spends 70 percent of the time performing supervisory duties, may temporarily move to nights and
have to perform additional nonexempt duties such as preparing a patient room for an emergency admission.

Likewise, Tia George, PHR, chief human resources officer and chief financial officer at Orbit Logic Inc., noted that employees of small organizations, even those with highly specialized knowledge, often perform a number of tasks that would be considered nonexempt.

Effect on Part-Time Exempt Positions

In SHRM talking points for the listening session, SHRM noted that a sizeable increase in the salary level would make it difficult to maintain part-time exempt positions. Under the current salary requirement, a part-time, pro-rated salary may establish the exemption if the pro-rated amount is at least $455 per week. Increasing the salary level could make it more difficult to maintain part-time exempt positions, which would disproportionately impact women who return to the workforce after the birth of a child or employees using job-share arrangements, SHRM noted.

Plus, there now is great uncertainty around exempt statuses. Without some kind of safe harbor, employers who adjust their employee exemptions will be subject to litigation.

Allen Smith, J.D., is the manager of workplace law content for SHRM. Follow him @SHRMlegaleditor.

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