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Salary floor for overtime exemption could more than double to $970/week

July 17, 2015
The salary floor to determine if certain workplace managers are exempt from overtime would more than double to $970 a week, or $50,440 a year, under a proposal by President Obama.
The regulation would be the most sweeping policy undertaken by the president to assist the middle class, and the most ambitious intervention in the wage economy in at least a decade. But administration aides warn that it wouldn’t always lead to wages going up because in many instances employers would cut back employee hours worked rather than pay the required time-and-a-half.
Even so, they say the additional hires needed to make up for that time could spur growth, and give existing workers either more time with their families or more opportunities to work second jobs and put more money in their pockets.
For years the White House has faced the frustrating reality that despite consistently improving economic numbers, wages have been largely stagnant. Obama’s 2014 push to raise the minimum wage struck many middle class voters as not having much to do with them. But the overtime rule would affect workers whose salaries approach the medium household income. The current threshold is $23,660 a year.
The overtime salary threshold has been updated only once since 1975 and now covers a mere 8 percent of salaried workers. Raising the threshold to $50,440 would bring it roughly in line with the 1975 threshold, after inflation. Back then, that covered 62 percent of salaried workers. The Obama administration’s proposal would cover a smaller percentage — about 40 percent.
If the proposal is adopted, the potential impact on dealers is murky, said Douglas Greenhaus, chief regulatory counsel for environment, health and safety with the National Automobile Dealers Association.
"We’ll take a look at who at dealerships fall between those two numbers and how the pay plans might be impacted," Greenhaus said. "Both the dealer and the employees may be impacted in a negative way."
That’s because many dealership employees prefer that a certain percentage of their compensation be salary. The dealer might have to reduce that salary amount to achieve overtime exemption, he said.
"This would impact those who get the majority of their pay from salary," Greenhaus said. "It has nothing to do with the commission-based employee. It has no effect on the salesman, parts man, F&I manager, or mechanic. They are exempt."
Greenhaus said an employee must also meet white-collar definitions to be exempt from overtime pay. That means the employee must be a professional, such as a full-time accountant, or an executive, meaning the person directs a department such as a sales manager, he said. Or the employee must be in an administrative role, definitions of which vary widely, Greenhaus said.
If a dealer is unsure whether an employee qualifies, the NADA advises to treat the employee as if he is eligible for overtime. The NADA offers its members an online guide to fair labor standards to help clarify an employee’s status.
The comment period for Obama’s proposal ends Sept. 4.