The U.S. Department of Labor today issued its much anticipated final rule on the overtime exemption for “white collar” workers under the federal Fair Labor Standards Act. The final rule is expected to impact the overtime eligibility of 4.2 million workers who are currently classified as “exempt” (non-overtime eligible) under the executive, administrative and professional exemptions. The new rule is expected to cost employers $12 billion in overtime wages over the next decade.
The final rule takes effect on December 1, 2016, giving employers just six months to comply.
Under the new rule, the minimum salary threshold for the overtime exemption increases from $23,660 to $47,476 annually – or $913 per week. That level equates to the 40th percentile of salaried workers in the lowest wage census region, currently the South. The rule provides for this rate to adjust automatically every three years based upon that same standard. The minimum annual salary threshold is expected to increase to more than $51,000 in 2020.
The proposed rule received unprecedented negative feedback from businesses, in particular in low wage industries (such as retail and service businesses) and the non-profit sector where the economic impact is expected to be most severe. Although the Department of Labor made some modest adjustments from its proposed rule, including reducing slightly the minimum salary threshold (from $50,440 to $47,476), business groups remain highly concerned about the potential impact on their workforces.
Other highlights of the new rule:
- For the first time, employers may credit nondiscretionary bonuses and incentive payments, including commissions, to satisfy up to ten percent of the minimum salary threshold. These payments must be made on at least a quarterly basis, and certain “catch up” payments are permissible.
- The total annual compensation threshold for highly compensated employees subject to a “minimum duties test” increases from $100,000 to the 90th percentile of all salaried workers, or $134,004.
- The current “duties tests” for the executive, administrative and professional exemptions remain unchanged.
Given this development, we recommend that employers take the following steps immediately in preparation for the December 1 effective date:
- Review the salary ranges of the positions in your organization that are currently considered exempt under the executive, administrative and professional exemptions.
- Consider whether nondiscretionary bonuses, incentive payments or commissions may be available to help reach the new minimum salary threshold.
- For those classifications that straddle or fall below the new salary basis threshold, consider whether to adjust them upward to maintain the exempt status, or whether to reclassify them as non-exempt, overtime eligible. If you intend to maintain the exempt status, make sure that these positions indeed meet the applicable duties test.
- For any positions becoming non-exempt, develop a plan to begin recording hours worked. Employers are required to keep accurate records of hours worked on a weekly basis for non-exempt workers. It may be helpful to begin tracking those hours now in order to better plan for the overtime conversion later this year.
- Develop a strategy to convert employees to an overtime eligible pay methodology that complies with the new rule, minimizes the economic impact on your organization, maintains pay consistency for workers, and accounts for issues of employee morale.
- If you want to continue to pay affected employees on a salary basis (rather than shifting these employees to hourly), consider whether the fixed salary for fluctuating hours (or flexible work week) overtime methodology may be available. This method complies with federal wage laws and may help reduce your overall overtime liability. Be sure to check state laws as well if you pursue this option.
- Evaluate whether to implement or extend work rules limiting or prohibiting unauthorized overtime to the classifications being converted to non-exempt status.
The attorneys in the Labor and Employment Group of Bose McKinney & Evans are available to answer your questions and provide guidance as needed to comply with this far-reaching new law.
A joint letter, commonly referred to as the “Dear Colleague” letter, from the U.S. Departments of Education and Justice was sent to schools today, Friday, May 13, 2016, with guidelines for every public school district in the country to allow transgender students to use the bathrooms that match their gender identity. (A link to the letter is available here.)
The declaration describes what schools should do to ensure that none of their students are discriminated against. The goal of the directive is to ensure that “transgender students enjoy a supportive and nondiscriminatory school environment,” the Obama administration reported on Thursday.
The letter does not have the force of law, but it contains an implicit threat: Schools that do not comply with the Obama administration’s interpretation of the law could face lawsuits or a loss of federal aid. Justice and Education Department officials have repeatedly made clear that under their interpretation of Title IX, the federal anti-discrimination law in education, schools receiving federal funds may not discriminate based on a student’s sex, including a student’s transgender status.
Historically, courts have not adopted Office for Civil Rights (OCR) legal analysis on this issue. Indeed, many courts have held that sex discrimination protection under federal law does not automatically extend to transgender students and employees. However, a recent Fourth Circuit Court of Appeals decision has opened the door for reconsideration of the legal precedent, and court opinions in the lawsuits between North Carolina and the U.S. Department of Justice also may change the legal landscape.
For help in how your school can best address the guidelines, please contact your attorney or a member of the Bose McKinney & Evans Education Law Group.
Leaders of the law firm of Bose McKinney & Evans LLP and Bose Public Affairs Group LLC, a government affairs and strategic communications firm, are pleased to announce that their office in Fort Wayne has moved to a new location to better serve clients.
The new office is located in downtown Fort Wayne at 200 East Main Street in the 1st Source Center. Since 2001, the firms have had an office in Fort Wayne for clients located in northeast Indiana.
Bose McKinney & Evans is a business law firm, serving both publicly held and privately held businesses, governmental entities and high-growth industries. Clients include Fortune 100 companies, international manufacturers, national and regional financial institutions, agribusinesses, sports teams, university-incubated start-ups, media, utilities, cities and schools.
The professionals at Bose Public Affairs Group provide local, state and federal government relations, strategic communications and strategic business services. Through the expertise of its professionals, clients receive political, legislative, regulatory and communications advice.
Bose McKinney & Evans and Bose Public Affairs Group are both headquartered in Indianapolis and also have an office in Washington, D.C.
The law firm of Bose McKinney & Evans LLP is pleased to announce that partner Bryan Babb was elected a member of the American Academy of Appellate Lawyers. Babb is one of six attorneys from Indiana who’ve received membership into the academy.
Founded in 1990, the American Academy of Appellate Lawyers recognizes outstanding appellate lawyers as well as promotes the improvement of appellate advocacy and the administration of the appellate courts. To become a member, a current academy member must nominate the appellate lawyer who is then reviewed and approved by the Membership Evaluation Committee and elected at a regular academy meeting.
Members of the academy possess reputations of recognized distinction as appellate lawyers with practices focused substantially on appeals during at least the last 15 years. Academy membership is limited to 500 members in the United States.
As a partner at Bose McKinney & Evans, Babb is the chair of the Appellate Services Group as well as a member of the Litigation Group. He assists clients with a wide variety of complex commercial appellate and litigation matters. Before joining Bose McKinney & Evans, Babb served as a judicial law clerk for Indiana Supreme Court Justice Frank Sullivan, Jr.
Babb often lectures on numerous aspects of appellate practice for the Indiana Continuing Legal Education Forum as well as for bar associations at seminars and conferences. He has appeared as a featured guest on several local and national radio shows and has been a reliable source to newspapers while representing clients.
Babb is a 16-year resident of Fishers, Indiana and has been living in the city since he graduated cum laude from Indiana University Maurer School of Law in Bloomington, Indiana. Active in the community, he serves as president of the Fishers Fire & Emergency Services Merit Board and vice president of the Fishers Police Merit Commission.
The law firm of Bose McKinney & Evans LLP is pleased to announce that Managing Partner Jeffrey Gaither was elected by the board as chair of the Greater Indianapolis Progress Committee (GIPC).
“I greatly appreciate the opportunity to become the GIPC chair and I am eager to work with an organization that has played such an important role in the success of Indianapolis,” said Gaither. “This is an exciting time for Indianapolis and I look forward to partnering with Mayor Hogsett and business and community leaders as we build on the city’s reputation of being one of America’s great cities.”
Founded in 1965, GIPC is a private, non-profit and non-partisan organization focused on strengthening Indianapolis through strategic community initiatives. The organization celebrated its 50th anniversary last year.
Gaither has been very active in numerous city and community initiatives over the past several decades and has practiced law in Indianapolis for more than 30 years. In addition to serving as managing principal, he is a partner in the Litigation Group at Bose McKinney & Evans where he represents clients in complex commercial litigation, appeals and arbitrations. He is a frequent speaker on business litigation and related topics.
The Indianapolis Foundation, an affiliate of Central Indiana Community Foundation (CICF) serving Marion County, announced its 2016 board of directors and officers. The six member-board representing The Indianapolis Foundation will continue a 100-year-old legacy of awarding grants that address the greatest needs in Indianapolis and Marion County.
The 2016 board of directors will be led by chairman Gregory Hahn, partner at Bose McKinney & Evans LLP. Hahn joined the board in 2011 and also serves on the board of CICF and English Foundation.
“This is an especially exciting year for Indianapolis,” said Hahn. “As the city celebrates its bicentennial The Indianapolis Foundation is celebrating 100 years of community investment, innovation and leadership. It’s a privilege to be a part of such an important legacy.”
The board is comprised of six directors: two appointed by the Mayor of Indianapolis, two by the Marion County Circuit Court Judge, and two by the presiding Judge of the United States District Court.