Employers face new wage, overtime changes
Oregon employers saw the new year usher in a significant wage and hour change from the U.S. Department of Labor that requires salary-exempt employees to earn $684 per week to be exempt from being eligible for overtime pay, up from $455 nationwide and $500 in Portland.
Kyle Abraham, an employment law attorney with Barran Liebman, said prior to the new rule under the Fair Labor Standards Act (FLSA), employees who made less than $455 were eligible for overtime, but if they made more they could qualify to be exempt from overtime.
"That's the biggest federal law change that we've seen come from administrative agencies like the Department of Labor," he said, adding it is unlikely employers will see additional changes from Congress "because of the gridlock."
The U.S. Department of Labor stated the change makes 1.3 million American workers eligible for overtime pay. The rule updates the earnings thresholds necessary to exempt executive, administrative or professional employees from the FLSA's minimum wage and overtime pay requirements.
"For the first time in over 15 years, America's workers will have an update to overtime regulations that will put overtime pay into the pockets of more than a million working Americans," Acting U.S. Secretary of Labor Patrick Pizzella said in a news release when the final rule was announced last fall. "This rule brings a common-sense approach that offers consistency and certainty for employers as well as clarity and prosperity for American workers."
The increased threshold amounts to $35,568 per year for a full-year worker and raises the total annual compensation level for "highly compensated employees" (HCE) from $100,000 to $107,432 per year. It allows employers to count a portion of certain bonuses and incentive payments, including commissions, that are paid annually to satisfy up to 10% of the standard salary level, in recognition of evolving pay practices. In addition, the new rule revises the special salary levels for workers in U.S. territories and in the motion picture industry.
Abraham, whose labor practice includes representing employers before labor arbitrators, the National Labor Relations Board and the Oregon Employment Relations Board, said that among Oregon employers, nonprofit organizations are likely to feel the most immediate effect.
"If you think about the impact, it's going to be on all employers who have employees who work a lot of hours and don't pay them very much," he said. "Nonprofits will probably be hit the hardest because they have executive directors and other employees who may want to do good work and put in a lot of hours."
Abraham said the broadest impact is that all Oregon employers will have to decide whether to reclassify currently exempt employees as hourly employees. Exempt employees will also still need to meet specific duties tests, such as "executive," "administrative," or "professional," for the overtime and working condition exemption to withstand scrutiny, according to the state's Bureau of Labor and Industries.
Many employers already made those classification decisions in 2016 when the Obama administration proposed a similar threshold increase that was invalidated by the U.S. District Court for the Eastern District of Texas on the eve of its implementation. Starting on Nov. 6, 2017, the U.S. Court of Appeals for the Fifth Circuit held the appeal in abeyance pending further rulemaking regarding a revised salary threshold
"Alternatively, the employer will have to decide whether to increase employees' salary to reach the threshold and maybe add more responsibility to the position to match the increased pay," Abraham said.
The U.S. Department of Labor stated that the increases to the salary thresholds are long overdue in light of wage and salary growth since 2004. During listening and public comment sessions it held as it calculated the increase, nearly every participant agreed that the thresholds needed to be updated.
The department estimates that 1.2 million additional workers will be entitled to minimum wage and overtime pay as a result of the increase to the standard salary level. It also estimates that another 101,800 workers will be entitled to overtime pay as a result of the increase to the HCE compensation level.
Abraham discussed the federal law change and new Oregon legislation that is impacting business owners and employers during a Jan. 8 presentation to the East Portland Chamber of Commerce at Adventist Health Center.
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