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FAQs on the new Overtime Rule

Q.           Who will qualify for overtime after the rule goes into effect?

A.           All covered employees who are not exempt under the new annual salary threshold and other qualifications.

Q.           When?

A.           The new rule begins December 1, 2016.

Q.           What was the old salary threshold? What is the new one?

A.           The old threshold was $23,660. The new one threshold is $47,476.

Q.           What is the overtime pay under this rule?

A.           One and a half times the employee’s regular wage rate.

Q.           So anyone who makes over $47,476 will be exempt from the overtime rule?

A.           Not necessarily. In addition to earning an annual salary over $47,476, employees would need to be paid on a salary basis and to have duties that fit one of the several tests for “white collar” exempt personnel, such as executive, administrative or professional jobs. Also, highly-compensated employees are exempt if they comply with a minimal duties test and are paid at least $134,004 annually. 

Q.           How does the Department of Labor (DOL) come up with these odd numbers?

A.           For most employees, it calculates the threshold at 40% of the wages paid to full-time salaried workers in the nation’s poorest region, which is currently the southern region, and for highly-compensated employees at 90% of all workers. The 40% adjustment recognized a concern expressed by NNA and others that the Labor Department had not taken into account the widely varying standards of pay across the country. Its original proposal was not pegged to the southern wage rates.

Q.           Does the threshold have to be met with salary alone?

A.           Up to 10% of the threshold can come from bonuses and commissions provided they are non-discretionary and are paid at least quarterly. If non-discretionary bonuses and commissions are paid to overtime-eligible employees, these payments become part of the hourly wage upon which time-and-a-half must be paid when more than 40 hours are worked.

Q.           How often will these rules change?

A.           DOL says the thresholds will automatically adjust every three years, beginning in January 1, 2020. This automatic adjustment, however, may be tested in court, as it is not clear the Department has the power to do adjustments without performing its own due diligence each time. If it does have the authority, the new threshold in 2020 is likely to be approximately $51,168 and continue upward triennially from there.

Q.           What is a “salary” under these rules?

A.           It is compensation regularly paid at a predetermined rate that is not adjusted for quality of output or quantity of time worked. Salaried exempt white-collar workers, therefore, can use flex time to take off days when the business’s work is slow to make up for extra hours worked during peak periods.  Non-exempt overtime eligible employees do not have this flexibility.  Overtime-eligible employees can still be paid by salary, at the employers’ discretion, so long as overtime is paid at the effective hourly rate (i.e., weekly salary/40 hours). But for many employers, shifting these newly-eligible workers to an hourly basis will be the tool they need to use to remain within budget. That means newly-eligible employees who work fewer than 40 hours a week may make less money than when they were on a salary.

Q.           Did this new rule change the minimum wage?

A.           No. It is presently set at $7.25 at the federal level. But many states and some cities have increased minimum wage on their own.

Q.           Aren’t newspapers with less than 4,000 circulation exempt from FLSA?

A.           From overtime and minimum wage rules, but not equal opportunity or discrimination rules.. But DOL now says it applies that standard only to “rural” newspapers, but provides no further explanation of “rural.” Questions about how the rule applies to groups with aggregate circulation over 4,000 are frequently asked. The answer depends upon how separate the newspapers are. DOL has not issued clear standards on how much separation is required. Consult your attorney before assuming the exemption applies.

Q. Are companies with annual revenues under $500,000 exempt?

A. Yes, if they do not engage in interstate commerce. But that engagement can be pretty minimal and still trigger FLSA. Having out-of-state subscribers, for example, would probably be sufficient.

Q.           What are the duties tests for executive, administrative and professional people, outside sales people and highly-compensated people?

A.           Consult your attorney before applying, as with all applications of this new rule. In general, executives manage departments and can hire/fire at least 2 people. Administrative people have non-manual office duties and can exercise independent judgment in their work. Professionals have advanced knowledge in specialized fields, do original and creative artistic work, teach in a school system, or are computer analysts. (Be aware that DOL does not consider most community newspaper reporters as professionals.) Outside sales people are also exempt if they work regularly and frequently away from the office and are engaged in sales. There are no salary or other fee rules for outside sales people. Highly-compensated people have to comply with one of the duties tests for executive, administrative or professional people and are engaged in office or non-manual work.

Q.           What is the threshold for part-time employees?

A.           If they are exempt under the duties test and are paid a set salary, there is no threshold. They must be paid at least minimum wage and if they do work more than 40 hours a week, they would not be considered part-time.

Q.           Is it possible to adjust a worker’s pay every week to stay within the rules?

A.           There is a fluctuating salary rule. Please consult Publishers’ Auxiliary issue of May 2016 for more information on how it works. Pub Aux is available to members at .

Q.           Are there other options to maintain budgets?

A.           The Labor Department recognizes several options for employers: reduce hours to maintain 40-hour work weeks, adjust base rates so that a predictable amount of overtime can be built in without adjusting total salary, give raises to people who are doing exempt work but are under the new threshold, and replace some full-time jobs with more part-time workers.

Q.           Are all businesses in our communities covered by this new rule?

A.           The Wage and Hour rules within the Fair Labor Standards Act are complex. Most businesses are covered. For example, certain non-profits may not be covered. It depends upon what activities they engage in. Schools are covered, but teachers are usually exempt. Consulting an attorney is advisable.

Q.           Does the rule change our ability to let staff work at home, such as when they keep social media up to date?

A.           Technically, no. Employers have the flexibility to permit telework. However, overtime-eligible employees will be required to keep strict time records, and many employers find off-site work hours difficult to manage. Employers are required to pay for time they ask employees to work as well as time they “suffer” to allow…meaning employees cannot volunteer to work for free. If the employer is aware of the time spent, the employer is liable for payment. Personnel manuals should make the rule clear: if time is worked, it must be recorded.

 

Provided by the NNA Federal Laws Hotline

Tonda Rush, NNA General Counsel

NNA members with questions are invited to contact the hotline, tonda@.

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