SPRING 2024

112
THE DISTRIBUTOR’S LINK
JIM TRUESDELL LABOR DEPARTMENT MOVES TO IMPOSE DRASTIC CHANGE TO OVERTIME THRESHOLD from page 44
To be exempt from overtime an employee must
[1] Be paid a salary which is fixed and predetermined
amount that is not reduced due to changes in the quality
or quantity of work performed
[2] Meet the specified minimum threshold amount,
whatever it turns out to be
[3] The work performed is primarily executive,
administrative, or professional in nature under a regulatory
“duties” test.
There is certainly reason to believe that some
companies take advantage of lower paid managers and
pressure them to work with no additional compensation
for long hours. That is why there is indeed consensus that
the minimum does need to be raised. The problem with
this move is that it calls for an unjustifiably high amount
which will hamstring otherwise well meaning and fair
employers. It is for this reason that the PPWO Coalition
raises the following arguments in their call for a more
reasonable plan:
[1] The new reg will work to the detriment of
employees who will see fewer opportunities for flexible
and remote work as well as fewer chances for career
development. Companies are likely to play it safe and
shy away from situations where work hours are difficult to
track. It will probably reduce time dedicated to training and
educational programs as well as remote work. Ambitious
workers may not be invited to “play” on high level projects
where they have a high learning curve, thus slowing their
chances for advancement.
[2] Part-time work opportunities may slow. The regs
don’t allow pro rating of the salary threshold. This would
appear to kill part-timers who could be performing at a
managerial level on a part-time basis.
[3] Many employees will see pay reductions rather
than the raises in total compensation they might be
envisioning. The difficulty in determining how to treat
existing financial incentive programs of managers when
it comes to calculating an overtime rate might cause
such incentive programs to be abandoned. Many salaried
managers might find themselves converted to hourly
status and feel a loss of prestige or partnership as a part
of the management team. Companies might start avoiding
scheduling management work that could lead to overtime
expenses thus harming both workers and company
productivity.
[4] Lost cost areas of business such as non-profits,
schools and business in rural areas might suffer the most.
Since salaries tend to be lower in these industries they
are likely to be most affected by the new rule, with more
workers near the threshold. There would be no regional or
market segment variations in the proposed regs.
Beyond these problems that will flow if the high
threshold levels are implemented, there is also a real
expectation that the new plan would not stand if,
inevitably, lawsuits are brought alleging due process
violations and arbitrariness in the job duty classifications.
A similar Final Rule in 2016 was knocked down by the
courts and there is every reason to believe this would be
the case again. So… why do something that will surely
have to be unwound after disrupting businesses who
would be scurrying to revise their salary practices and
employee job assignments all to avoid running afoul of
the regs. The answer to this “why” is probably that it is
a perfectly good political tool to position the President
as the protector of workers and even be able to point to
the need to replace court judges with more pro-employee
arbitrators who would see things more in the way the
Administration desires.
“We’re disappointed DOL has decided to move
forward despite repeated requests from PPWO and the
regulated community to abandon or at least delay the
regulation until the economy stabilizes,” said PPWO
spokesperson Josh Ulman.
As we head into the early Spring period not
much is being said to detract from the impression
that implementation is on track. Will there be another
extension delay or move to lower the proposed threshold?
Watch closely!
JIM TRUESDELL