How should Connecticut employers react to the proposed new federal rules on white-collar overtime exemptions?
Not with panic, but not with a yawn, either.
It’s been a while since the Obama administration proposed jumping the minimum exemption from the current, outdated, annual $23,660 to close to $50,000 and to tying automatic future increases to the Consumer Price Index. The magnitude of that proposed change was breathtaking for many employers and a federal court stopped implementation.
The Trump administration’s proposal would increase the salary minimum to start the exemption at about $35,000 per year. Future changes would be considered every four years. Other parts of the proposal would allow employers to count different kinds of compensation, like commissions and bonuses, toward the salary minimum.
An exemption from wage and overtime laws means an employee can work way beyond a typical 40-hour week and not get a penny of overtime pay. It also means minimum hourly wage requirements don’t apply to that employee.
Another big difference from the Obama administration proposal concerns a high earnings threshold that exempts from overtime jobs with work content not qualifying for any standard white collar exemption. Currently this applies to workers earning as little as $100,000 per year. Under the Obama administration proposal, this would have changed to $134,004. The Trump administration proposal would lift this higher to $147,414.
Before businesses get too excited about this, they should remember that Connecticut employers cannot take advantage of this exemption at whatever level the federal regulations may dictate as our state minimum wage and overtime law does not include a parallel provision and compliance with both federal and state law is required.
The current proposal would leave in place overtime protections for certain professions like police officers, firefighters, nurses, emergency medical technicians and building tradespeople.
In practice, Connecticut salaries are often higher than the minimums for the kind of supervisory or policy decision-making roles the exemption covers so that the new minimums may not have considerable practical effect.
Those employers whose pay scales are low enough to be impacted might seek to control costs to some extent by using multiple workers with shorter work weeks to perform the jobs, avoiding the time-and-a-half pay bump required for non-exempt work over 40 hours in a workweek.
With the current scarcity of workers, it is unlikely that employers seeking to hew to the cheapest legal compensation will be successful in the “battle for bodies” underway in U.S. labor markets.
Margaret Sheahan is an attorney at the law firm Mitchell & Sheahan PC in Stratford. She can be reached at 203-873-0240 or MSheahan@mitchellandsheahan.com.