W2 Issues/Concerns

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Check out our weekly blog posts and see the latest news and discussions happening in the HR world of business.

Why You No Longer Have to Worry About That Pesky Overtime Rule

A federal court recently determined that the Obama-era changes to the Department of Labor overtime rule represented an overstep of the agency’s power and, in some aspects, was even unlawful!

 To back up, Congress enacted the Fair Labor Standards Act (“FLSA”) in 1938 to ensure that “employees engaged in commerce receive not less than the federal minimum wage (currently, $7.25 per hour) for all hours worked.” The act also entitles employees to 1.5 times the employee’s regular rate of pay for all hours worked above forty in a week, but included a number of exemptions to the overtime requirement. In the years since, the act has undergone several reforms and changes to keep up with the way in which companies do business in today’s environment.

However, one of the most major calls for reform was announced in March 2014 when then President Barack Obama issued a memorandum directing the Secretary of Labor to “modernize and streamline the existing overtime regulations for executive, administrative, and professional employees.” As part of the change, the threshold salary for overtime would have been raised from $23,600 to $47,476 and thus created a flood of newly overtime-eligible employees.

 In the federal lawsuit, which represented 21 individual states, a Nevada federal court judge ruled that the DOL set the salary threshold so high that it had essentially made the duties, functions and tasks of the employees in question irrelevant. Further, the court suggested that the agency didn’t actually have the authority under the FLSA to do that, and also drew issue with the agency’s OT provision that automatically escalated the salary threshold every three years, calling it unlawful.

So what does that mean for you, and the plans you had set in place to adhere with the new overtime rule?

Well, essentially, for now, you can kick them to the curb!

 Instead, you can continue to use the 2004 (most current) version of the FLSA. However, it should be noted that the DOL is already requesting information to draft a new proposed rule. As to what it might look like, at this point, it is all a bit of a mystery, but experts suggest that while it will likely include a minimum salary threshold, it will be a lot more conservative than the previous iteration (more in the line of $33,000 or so). In addition, the agency is expected to look more closely at the duties tests that help best define employees, which was something that was not too closely considered in the last round of changes.

To read the full ruling, click here.


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