• FEDERAL GOVERNMENT ISSUES FINAL OVERTIME RULE UPDATES

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    October 21, 2019
    FEDERAL GOVERNMENT ISSUES FINAL OVERTIME RULE UPDATES

    The Trump Administration issued its final rule to update federal overtime eligibility standards for Executive, Administrative and Professional – commonly referred to as “white collar” – employees.  The changes are scheduled to go into effect on January 1, 2020.
     
    The most significant update is a change to the salary threshold at which an employee may potentially be exempt from overtime pay – the rule calls for increasing the threshold from the current level of $455 to $684 per week (equivalent to an annual threshold salary of $35,568).    In recognition of evolving pay practices, the new rule allows for nondiscretionary bonuses and incentive payments paid at least annually to satisfy up to 10 percent of the standard salary level.  No change is proposed to the so-called duties tests, which define Executive, Administrative and Professional, and the rule does not require automatic salary threshold increases, as had been previously proposed.  The rule does increase the “Highly Compensated Employee” exemption from $100,000 to $107,432, however Pennsylvania employers are currently unable to utilize this exemption, as well as others, based on a quirk in state law, which State Senator Lisa Baker is attempting to remedy through S.B. 762.
     
    These changes have generally been viewed as significant but far more reasonable than previous iterations. In 2015, President Obama proposed doubling the minimum salary threshold for exemption and requiring regular increases.  The response from employers was swift and deeply negative, particularly among small businesses, nonprofit organizations, higher education institutions and the health service industry, among others. Employers not only described significant increases to the cost of providing services or doing businesses, but also the reality that this dramatic change would damage workplace culture and morale, as employees would have to be shifted from earning a salary to being paid by the hour. This transition typically requires employees to start clocking in and out, along with more burdensome record-keeping, less flexibility, a rigid work schedule and fewer training opportunities and benefits.  The Obama-era rule was ultimately thrown out by a federal judge.
     
    Last year, the Wolf administration proposed changes to the state’s overtime rules that mirrored the Obama administration’s proposal.  Following a public comment period – in which the PA Chamber spearheaded a campaign for employers to voice their concerns – the state’s Independent Regulatory Review Commission issued its own comments with a significant number of questions and suggestions to which the Department must respond in a subsequent filing. Among IRRC’s directives to the Department was more robust stakeholder outreach and in May and June of this year, the Department conducted a series of employer roundtable meetings throughout Pennsylvania. The Department recently announced a new proposed rule. Watch for details in a future newsletter and on our website huntingdonchamber.com.
     
    More information on the federal overtime rule can be found on the U.S. Department of Labor’s website.