Editor's Note: The Livingston Parish News is a member of the National Newspaper Association and receives information from Washington, D.C. The following will be of interest to business owners and employees alike.
Q: Are the rules for exempt employees about to change again? If so, when?
A. Possibly, but they have not changed yet.
In March, the U.S. Department of Labor restarted an industry conversation that began in 2015. That was when the Obama administration proposed doubling the salary that employees would have to be paid for them to be considered exempt. But that proposal never went into effect. The current proposal would increase threshold levels for exempt employees from $23,660 to $35,308 a year.
Exempt employees are expected to work to the requirements of the job and are not paid overtime.
To be considered exempt, an employee would need to both reach the salary threshold and perform work that meets one of several “duties tests” to evaluate the sort of work for which they are responsible. Categories for those “duties tests” most used in the newspaper business are the administrative, professional and outside sales employee categories. None of the duties tests are up for change — only the threshold salary requirement.
When will the rule go into effect? Not for several months, at the earliest. The Labor Department is currently receiving comments on the proposal. Then it will have to deliberate and publish a final rule, which would be no earlier than the end of May, and could be longer. And then, litigation might put the rule on hold, as a lawsuit in Texas did with the Obama administration rule.
Accordingly, employers have some time to consider their options and determine if they will have to reclassify employees. Here are some options NNA newspapers reported they were considering in 2015:
1. Raise some currently exempt employees whose salary is under $35,308 to keep them exempt, and then raise prices to cover rising salary costs. But in the current competitive environment, higher prices may be impossible.
2. Reclassify some currently exempt employees as non-exempt to hold current compensation levels. Strict rules prohibiting work over 40 hours each week by non-exempt peo-ple can be adopted, but if an employee violates the rule by working overtime anyway, the employer must still pay for the extra hours at time-and-a-half. This option likely will require offering a slimmer editorial package and deciding not to cover some community activities. Employees who are non-exempt may not “volunteer” to work extra hours for free. Of course, employees who consistently violate the no-overtime rule are candi-dates for termination.
3. Trim benefits for existing exempt employees to save money for the new payroll costs.
4. Cut staff to pay for higher costs of remaining work force.
5. Build in expected overtime by lowering existing salary and then adding in a set-amount of time and a half.
For example, if Charlie is paid $25,000 currently but is doing otherwise exempt work in a 42-hour work week, Charlie’s new pay package could be $23,135 plus $36.04 for two hours of overtime each week, which is his roughly $12.01 hourly rate at time and a half, times two hours. But that creates some risk for both Charlie and the boss. If Charlie does not put in the extra two hours, he would lose $36.04 per week. If he works three hours, the boss owes him an extra $54.07. Charlie would be a non-exempt employee under this system. Note that it does not matter under the rules whether Charlie is paid on a salary or hourly basis now, but if non-exempt, the hourly pay will provide the basis for time-and-a-half.