Regulation increases minimum wage for overtime exempt employees
July 31, 2016 at midnight
Updated July 31, 2016 at 10:50 a.m.
Starting Dec. 1, businesses will have to either raise their salaried employees exempt from overtime to the new minimum of $47,476 per year to remain exempt or track their hours and pay overtime.
This can potentially increase a business' employment costs or affect an employee's job satisfaction, attorney Lee Keeling said.
"If you want them to continue the way they're working now, you're going to have to increase their salary," Keeling said. "That can be very expensive for some employers."
Keeling explained the new Department of Labor law to a roomful of business owners and manager Thursday.
Most businesses can't afford to raise their salaried employees' wages to the new minimum, Keeling said. Many salaried employees work irregular hours from week to week, and if switched to hourly this would give them inconsistent paychecks, which could affect their job satisfaction, he said.
Currently, employees exempt from overtime have to make $455 a week or $23,660 a year, and are paid on a fixed salary.
With the new regulation from the Department of Labor they will have to make $913 a week or $47,476 a year to be exempt.
Job requirements to be exempt from overtime haven't changed with the new regulation, Keeling said. Employees' job responsibilities have to primarily involve administrative, executive or professional duties to be exempt.
Salaried employees can remain on a fixed salary, but if they work more than 40 hours a week they will have to be paid overtime, Keeling said. Time keeping will most likely be the biggest issue with the new regulation, he said. Many salaried employees have duties that make time keeping difficult such as work at home, after hours, business development responsibilities and on-call duties.
"Most of those people work without regard of their hours," he said. "They don't even keep track of their hours. They just work to do the job."
If business owners and employers don't want to convert their salaried employees to hourly, they have options, Keeling said.
An option that would work for all businesses is to continue to pay a salaried employee a fixed salary and pay overtime at time and half at a regular hourly rate, Keeling said.
"A misconception is that if you're not exempt you must be paid hourly, which is not true," Keeling said.
The fluctuating work-week plan is an option that may work for some employers under certain circumstances relating to the type and nature of work performed, he said. The plan consists of making an agreement with the employee to pay a fixed salary for all hours worked in a week more or less than 40, plus overtime for more than 40 hours at one-half the regular hourly rate calculated for that pay period.
Employers may be tempted to build overtime into a salary but that is unlikely to work in any circumstance other than when a pay plan arrangement is made. The plan is only available when the employees' schedule varies significantly both above and below 40 hours each week, Keeling said.
Michael Brown, Catholic Diocese of Victoria's chief financial officer, said the diocese is doing research to figure out what to do regarding the new regulation. Catholic parishes, missions and schools in the area report to the Diocese of Victoria.
The Diocese has administrative employees who work in the chancery offices who the new regulation will affect. They cannot afford to raise their salaries to the new minimum for the employees to remain exempt, Brown said.
"We have to determine the best way to manage people to continue to offer our services without having a negative impact on our cost of operations," he said.
If the cost of operations does increase for the organization, Brown said they will have to figure out a way to get the money from somewhere.
"Do we fund it by reducing cost somewhere else?" he said. "Do we apply for grants? How can we operate our business without reducing services? That's the challenge. We have to figure out a way to do what we do, comply with the law and be fair to our employees."
LodeStone Financial Services in Victoria has two administrative employees that the new regulation will affect, said Howard Goode, business partner.
They will most likely count the employees' hours and pay time and a half overtime for more than 40 hours worked a week. It won't affect his business until the last quarter of the year during the business' busy season. The employees probably won't work more than 40 hours a week until then.
Ruth Constant, who owns Ruth Constant and Associates, a medical home help agency, has eight employees throughout her four offices in Texas that will be affected by the new regulation. Right now she is considering redefining their job responsibilities and putting them on an hourly pay, but she could change her mind, she said.