Proposed Overtime Regulations Use Flawed Methodology

NACS responds to Department of Labor’s proposed changes governing overtime pay.

September 08, 2015

WASHINGTON – On Friday, NACS submitted comments on the Department of Labor’s (DOL) recent proposed changes to the federal regulations that govern what salaried workers are eligible for overtime pay. In July, DOL proposed a dramatic increase in the pay threshold under which salaried employees must be paid overtime rates for hours worked in excess of 40 in any particular week. The department proposed more than doubling the current standard last adjusted in 2004 by the Bush Administration.

While such a dramatic increase in the threshold is concerning, the comments submitted by NACS focused primarily on the flawed methodology that DOL used in coming up with the new number.

Historically, DOL has appropriately treated this as a guide to the classification of employees and not a barrier to exempting managerial employees from the overtime regulations. By so dramatically changing their methodology in determining the new salary threshold, the organization will effectively reverse that historic precedent. With that in mind, NACS suggests that the DOL should essentially throw out its current proposal and create a new one using the traditional methodology that has proved effective in the past.  It should be noted that this may yet result in an increase in the minimum salary number, but even so, it would likely be a much more realistic number reflecting regular salary changes since 2004.

The second focus of the comments NACS submitted was the DOL’s proposal to automatically update the salary threshold on an annual basis. Importantly, NACS does not believe that DOL has the authority to do that, but failing that argument, it is not realistic to expect that businesses are able to budget properly facing likely annual increases in this threshold. If an automatic update does exist in this rule, it should be no more frequent than every three years, NACS argues, including a cap on how much it can increase in any one adjustment; include a “safety valve” procedure where an update unduly influenced by exceptional or unforeseen circumstances could be prevented by federal authorities at the DOL; and the DOL should choose an entirely different method to tie the indexing itself. 

NACS commented on two other areas:

  • The DOL is considering including non-discretionary bonuses in the salary calculations; NACS believes that non-discretionary bonuses and commission compensation should be allowed to be included in the salary threshold.
  • Secondly, the DOL did not propose any changes to the existing “duties tests” that govern the exemption categories for those who make over the minimum threshold. NACS also believes they should not be changed. NACS does however include some suggestions in the event that DOL chooses to make changes there. Notably, there should be no minimum percentage requirements for non-exempt work or restrictions on concurrent duties. Both of those are important distinctions in the flexible workforces with varying responsibilities found at convenience stores today. 

You can read the NACS comments in their entirety here .

Advertisement
Advertisement
Advertisement