The US Department of Labor recently announced a new overtime rule directed at so-called white collar workers who, because of their job position and supervisory responsibilities, are exempt from overtime pay if they currently make more than $23,660 a year. This threshold salary amount has been raised to $47,476 a year and goes into effect on December 1, 2016.
In prior statements, the US Department of Labor has stated that this revision is directed at employers with employees who work long hours, without overtime, who also may not be correctly designated as an exempt employee under the present law. There have also been allegations of fraud, as to employee classifications and duties, to avoid otherwise payable overtime. According to the US Department of Labor, this situation existed, as an example, in the fast food industry where so-called “managers,” sometimes with little management authority, worked long hours without overtime.
The requirement that so-called exempt “executive” employees, to qualify for the overtime exemption, must supervise the work of two or more employees for the executive exception and exempt “administrative” employees, as part of their job duties, must exercise discretion and independent judgment, among other criteria, has not changed and will continue to be reviewed and enforced. This employee designation, when correctly applied under the law, is the first part of the test for an overtime exempt employee.
There is also a “professional exemption” from overtime that has less of an impact nationally on funeral directors. Several Federal Court decisions have found that the professional exemption could be applied to licensed funeral directors and embalmers in those 14 states that require at least three years of post secondary education and one year of apprenticeship or internship to qualify as a funeral director. In Maryland, given the statutory licensing requirements that currently exist, the professional exemption would not apply. The exemptions that may be applicable to a specific funeral director employee would be the executive or administrative exemption as the Maryland law does not require as much pre-licensing education as arguably could raise the status of a Maryland funeral director to an exempt professional under the Wage and Hour Law.
If a Maryland funeral director otherwise qualifies as an exempt executive employee or an exempt administrative employee, the revised overtime rule requires that the employee must also earn over the new specific threshold amount of $47, 476 to qualify for the overtime exception. If the employee does not earn this amount, even though the employee’s duties would make the funeral service employee otherwise exempt, the overtime exception would not apply. In determining the annual salary level, the new regulation does allow employers to count non-discretionary bonuses and incentive payments, including commissions paid to an employee, to satisfy up to 10% of the new $47,476 threshold.
The compliant use of the Fluctuating Work Week Method of Payment, which provides a guaranteed salary per week with a straight time earnings calculation providing half time for hours that exceed 40 in a work week, is unchanged. If this method is used, your accountant should be contacted with any questions that you may have to assure continued compliance with the Wage and Hour Law.
The Final Rule also establishes a mechanism to automatically update the salary and compensation levels every three years. There is an effort, in Congress to block the US Department of Labor from spending funds to enforce this new regulation. Whether or not that effort would be successful and whether it would be subject to a veto by the President, has yet to be determined. One thing, however, is clear. The salary threshold for the overtime exception has been raised as of December 1, 2016 and the duties test, to determine classification as an executive or administrator employee will be reviewed and continued to be enforced.
If you have any questions regarding enforcement of the new overtime regulations or an employee classification, you can contact Edward M. Ranier, Esquire, at (410) 967-1812 or at firstname.lastname@example.org.