September 4 marked the deadline to submit comments to the Department of Labor on its proposed new overtime rules. The Washington Post reports that the Labor Department received 155,000 comments—demonstrating controversy around the new rules.

The Obama Administration had proposed to make 5 million additional workers eligible for overtime pay by more than doubling the salary level below which employees are eligible for overtime from $23,660 a year ($455 a week) to $50,440 ($970 a week) in 2016.  

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Proposed New Overtime Rules: SHRM and NRF Comment

Fri Sep 18, 2015

September 4 marked the deadline to submit comments to the Department of Labor on its proposed new overtime rules. The Washington Post reports that the Labor Department received 155,000 comments—demonstrating controversy around the new rules.

The Obama Administration had proposed to make 5 million additional workers eligible for overtime pay by more than doubling the salary level below which employees are eligible for overtime from $23,660 a year ($455 a week) to $50,440 ($970 a week) in 2016.

The Labor Department would also institute a regulatory escalator to automatically increase the salary threshold every year, possibly based on the consumer price index.

Of special interest to HR, Payroll, Benefits and Compensation professionals may be the comments of two prominent organizations—the Society for Human Resource Management (SHRM) and the National Retail Federation (NRF).

SHRM—

The leading organization of HR professionals, SHRM focused on several points:

Number OneWhile a “reasonable increase” in the salary threshold is appropriate, “the proposed level is too high.” In SHRM’s opinion, the $50,440 threshold “will have a significantly negative impact on employers and employees,” particularly “nonprofit organizations, state and local governments, and organizations based in certain regions.”

Number TwoSHRM targeted an apparent flaw in DOL’s justification for the new salary threshold: “3.7 million employees who earn less than the proposed new salary threshold do not regularly work more than 40 hours a week.” Therefore, “only 988,000 employees are likely to see any benefit in terms of additional salary, overtime wages or additional time off,” while the rest “will experience the negative consequences of reclassification, including reduced workplace flexibility.”

ceridian-number-three.pngFinally, according to SHRM, “70% of employers would implement restrictive overtime policies, leading to a potential reduction in employees working overtime.”

NRF—

Retail is America’s largest private sector employer with 42 million workers, according to NRF, supporting 1 in 4 U.S. jobs. The association’s comments focus on 4 key points:

Number One“The attempt to raise employee wages by fiat ignores economic reality and will have major negative consequences for employees, employers and the economy as a whole.” The proposal “is simply a bad idea…in today’s volatile economy.”

Number TwoAnd because the new rules will force retailers and restaurants to reclassify many managers as hourly workers, “the change would result in the extinction of middle management in the retail industry.”

ceridian-number-three.pngThe proposed $50,440 national salary threshold fails to recognize significant regional variations in wages and living standards. “In 10 states—AL, GA, HI, ID, KY, NV, ND, SC, SD and TX—that dollar figure would bring at least 45% of full-time salaried workers under overtime rules. In another 8 states—AK, FL, LA, MS, NC, OK, TN and WV—at least 50% would be covered.”

Number FourFinally, NRF states that employers will (1) “increase compensation levels of certain managers to keep them exempt; (2) eliminate many middle management jobs resulting in reclassified workers receiving reduced overall compensation packages; and (3) reduce employee hours to avoid overtime.”

Significantly, and recognizing the interaction among bonus payments, the regular rate of pay and overtime calculations, NRF suggested that “reclassified managers may no longer be eligible for performance-based bonuses, which would reduce reclassified employees’ earnings potential.”

Back in March 2014 President Obama called the existing overtime regulations “outdated” and directed the Secretary of Labor to “propose revisions to modernize and streamline” the regulations.

The comments submitted by SHRM and NRF underscore that while employers may agree the time is right to update the rules, many do not agree that it’s time to more than double the salary threshold.