Thursday, March 13, 2014

Obama Moves to Change FLSA Rules on Overtime

And how the media plays that tune…..

The business world (including HR) is all abuzz over President Obama’s latest effort to "bridge the gap" between the rich and the rest of us (his goal) and to continue the fight against what he says is a crisis of economic inequality in the country. He is seeking to have the Fair Labor Standards Act amended to make more jobs eligible for overtime pay. This article from the New York Times is typical of the media coverage surrounding this news: Obama Will Seek Broad Expansion of Overtime Pay.

If you’ve read this article, or others that quote the same sources, and pretty much say the same thing, you might not realize that what is presented as fact, is not factual – at all. This is the type of thing that sets my hair on fire. The media like to make headlines and get people to buy their papers, read their website and spread their word all over social media, in order to widen their audience, and therefore increase their profits. The only problem with this is that they often miss the mark concerning truth and fair representation of the few facts they do sprinkle throughout their articles. And, we all might ask, why haven’t any of these journalists done any (easy) research or investigation to ensure what they’re printing is accurate? Because, in this case, there are lots of inaccuracies and misconceptions concerning the current law and regulations covering which positions are exempt from overtime requirements and which are not exempt.

The NY Times article states that "Under current federal regulations, workers who are deemed executive, administrative or professional employees can be denied overtime pay under a so-called white-collar exemption." First, I question the use of the word "denied", there’s a lot of words like denied and blocked; it’s just a bit inflammatory. The law allows these types of positions to be exempt from overtime requirements due to the nature of the job, the decision making and discretion involved in those jobs, and other considerations. The bottom limit on the rate of pay for these exemptions is but ONE of several considerations. (By the way, the labels "Executive", "Administrative" and "Professional" come from the Department of Labor.) People who hold positions that are exempt from overtime requirements are paid for the job they do, not for the number of hours they work. There may be weeks where someone works 50 hours, but there may also be weeks where they work 30 hours – they receive the same pay either way – hence being paid for the job, not how long it takes them to do the job.

The article goes on to say "Currently, employers are prohibited from denying time-and-a-half overtime pay to any salaried worker who makes less than $455 per week. President Obama’s directive would significantly increase that salary level." The salary test under the FLSA regulations is simply one of many used to determine if a position is eligible to be exempted from overtime regulations; it is by far not the only one, and not even the most important one. This directive would seek to change some of those rules, as well. However, the way this article presents one of the rules – which considers what is the primary responsibility of the position under the executive, administrative or professional exemptions – implies an employer can exempt a position even when the duties are primarily non-exempt in nature. The article quotes Ross Eisenbrey, vice president of the Economic Policy Institute, a liberal research organization in Washington as saying "Under current rules, it literally means that you can spend 95 percent of the time sweeping floors and stocking shelves, and if you’re responsible for supervising people 5 percent of the time, you can then be considered executive and be exempt." If the author did a simple Google search he would find the rules on the Department of Labor’s website. In this case, the DOL’s FLSA Advisor gives the following guidance in determining if a position qualifies for an executive exemption:
Primary duty means the principal, main, major or most important duty that the employee performs. The determination of an employee's primary duty must be based on all of the facts in a particular case, with the major emphasis on the character of the employee's job as a whole. While time is not the sole test, as a guideline, an employee who spends more than 50 percent of his or her time performing a specific activity can generally be said to have that specific activity as his or her primary duty. If the employee spends less than 50 percent of his or her time performing his or her major or most important duty, the employee may still meet the primary duty requirement if other factors support that conclusion. Please review the definition of primary duty for further information regarding this requirement.
Management generally includes activities such as: supervising other employees of the employer; interviewing, selecting and training employees; setting and adjusting their pay rates and work hours; directing their work; conducting employee performance appraisals; handling employee complaints and grievances; and disciplining employees. It also includes other functions, such as planning the work; determining the merchandise to be bought, stocked and sold; planning and controlling the budget; and monitoring or implementing legal compliance measures.
Recognized department or subdivision refers to a unit of the business enterprise that has a permanent status and a continuing function as opposed to a mere collection of employees assigned from time to time to a specific job or series of jobs without permanent status as a recognized unit with a continuing function in the employer's organization. Please review the definition of enterprise or recognized subdivision for further information regarding this requirement.
Such a job as described would most likely not qualify under the Administrative or certainly not the Professional exemptions, either. Here is a DOL Fact Sheet on the Administrative exemption (it also contains links to the Fact Sheets for the other allowed exemptions) DOL Administrative Exemption Fact Sheet. All of this clearly shows that the statement in this article is misleading at best. So, that worker who’s sweeping floors and stocking shelves 95% of the time sure as heck is not exercising discretion and independent judgment with respect to matters of significance for the business. Nowhere does it say, or imply, that the exemption would apply for any position only performing 5% of the duties necessary to satisfy the requirements. But, I guess that sounded good to make their point. Too bad it’s not accurate.

Another aspect that is problematic about such efforts is that they focus on the individual performing the job. The Obama administration’s efforts have been all about raising the income of more people, and changing laws to make that happen. However, the DOL clearly reminds us that in this case, it is the specifics of the job itself, not the person performing the job, that determine if an exemption from overtime applies. A similar argument can be made in regard to the minimum wage debate. A job pays minimum wage because the job itself requires minimum skills, knowledge and abilities. It is not a commentary on the person holding the job. Someone could have a minimum wage job for a very long time (and probably get some raises), but the job is still a minimum wage job and will not increase much in its basic value over time. On the other hand, the person would hopefully gain skills and experience over time, and would then be able to secure a higher value/higher paying job. Raising the minimum wage as a way to "help" people simply results in overvaluing such jobs and does little to truly help those very people. A more effective way to help them would be to find ways to allow them to gain more skills, knowledge and abilities so they are able to secure jobs with higher pay, rather than to artificially alter the environment, to the detriment of our economy, the businesses that provide the jobs, and the very people these misdirected efforts are intended to help.

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