05/20/2016

New salary level threshold for the white collar exemptions

By Scott Gilligan, OFDA General Counsel

On May 18, 2016, the U.S. Department of Labor (DOL) issued its long-awaited revisions to the salary level threshold for the White Collar exemptions.  The final rule increased the current annual salary level threshold from $23,600 to $47,476 ($913 a week).  This figure was a reduction from the salary level of $50,400 which the DOL had originally proposed back in July, 2015.  The reduction apparently occurred in response to the arguments of many commentators, including NFDA, that the original DOL proposal ignored the fact that the cost of living varies throughout the country.  The lower threshold of $47,476 is now based upon average salaries in the lowest-wage Census Region (currently, the South) rather than national averages.

Unless blocked by Congress or the courts, the new regulation will take effect on December 1, 2016.  Additionally, the salary level will now be adjusted by the DOL every three years beginning on January 1, 2020.  It will be set at the 40^th percentile of earnings of full-time salaried workers in the lowest-wage Census Region.

The final regulation made no changes to the factors used to qualify an employee as a professional, executive or a high level administrator under the White Collar exemptions.  This was welcomed news since some anticipated that the DOL would further tighten up the requirements to qualify for the White Collar exemptions.

Under DOL’s current regulations, Ohio is only one of two states (Minnesota is the other) where funeral directors qualify under the professional classification of the White Collar exemption.  This means that since 2004 when the DOL regulations were issued, Ohio funeral directors and embalmers could be paid on a salaried level and were not covered by the overtime provisions of the Wage and Hour laws.  As long as the funeral director or embalmer made over $23,600 (the current salary test), they were exempt from Wage and Hour provisions.

Assuming the new DOL White Collar regulation is not blocked by the courts or Congress, starting December 1, 2016, Ohio funeral directors and embalmers will have to be paid an annual salary of at least $47,476 in order to be exempt from the Wage and Hour provisions.    When calculating the amount of the salary, the new DOL regulations allow an employer to count nondiscretionary bonuses and incentive payments (including commissions) paid to the employee to satisfy up to 10% of the $47,476 threshold.  Therefore, if licensed funeral directors and embalmers are paid set bonuses for certain tasks like nighttime removals and embalmings or if they receive commissions for things such as preneed sales, those amounts may be considered as part of the salary to the extent they do not exceed 10% of total consideration.

As noted above, the final regulation could be blocked by Congress.  In March, 2016, the Protecting Workplace Advancement and Opportunity Act (HR 4773/S.2707) was introduced in both the House and Senate.  The Bill would prohibit the Department of Labor from spending funds to enforce the new regulation.  Although the Bill has obtained a number of co-sponsors, it is anticipated that even if Congress passes it, it would be vetoed by President Obama.  It is doubtful that there are sufficient votes to overcome a veto.  Therefore, legislative relief is highly unlikely. 

OFDA will continue to track developments with the DOL’s final regulation, including any lawsuits that may be filed to block the regulation.  We will also be publishing information on the use of a variable workweek arrangement which funeral homes that pay a licensee less than $47,476 can utilize to lessen the monetary burden of overtime payments.  In the meantime, if OFDA members have questions regarding the DOL final regulation, they may contact NFDA’s General Counsel, Scott Gilligan at (513) 871-6332.