LOW-LEVEL MANAGERS MAY GET SALARY BUMP UNDER DEPARTMENT OF LABOR PROPOSAL
QUESTION: Back in 2016, before the presidential election, I read a lot about a higher minimum salary for managers. Then nothing happened. Last year I increased the salary I pay the manager of a boutique I own to $34,000 a year. Am I paying her enough?
ANSWER: Under current law – the 2016 changes were challenged in Court — you’re paying her more than enough. The minimum you can pay a manager to pass the “salary basis” test and avoid paying overtime is $455 per week, or $23,660 per year. But that may change soon.
On March 7, the Department of Labor issued a proposed rule that would require employers to pay salaried workers at least $679 per week ($35,308 per year). Pay less than that, and your worker will be classified as hourly – and you will have to pay her overtime at time and a half for every hour over 40 per week.
Under the Fair Labor Standards Act (FLSA), which applies to employees of businesses that have gross receipts/sales of at least $500,000, hourly workers (also called “non-exempt” workers) must pay overtime. However, executive, administrative, professional, computer and outside sales employees are exempt from the overtime requirement – and can be paid on a salary basis, in which they receive a set amount regardless of “variations in the quantity or quantity of the employee’s work.” Under the present rule, some managers or assistant managers work major hours for minimal pay – often earning less than the workers they supervise.
In order to get the overtime exemption, the worker must not only fall into one of the exempt classes, but must also be paid a salary that meets minimum requirements. By boosting the salary, the new proposal, like the 2016 rule, is designed to make classifying a low-level worker as a salaried manager less attractive: Employers might come out ahead paying their managers an hourly rate and overtime.
The big difference between the Obama rule and the proposal now being put forward by the Trump Administration is the size of the salary employers would have to pay to win exempt status for their supervisory workers: $47,476 under the Obama plan vs. $35,308 under the Trump proposal.
The current proposal is now open for public comment; once the comment phase ends, it will likely become the law later this year, or early next year. You may have to give your manager another raise, but it won’t have to be a big one if the current proposal becomes law.
Anyone who wants to comment on the proposed rule can do so until May 21, 2019, at www.regulations.gov (rule making docket RIN 1235AA20).
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By: Daniel A. Gwinn, Esq.
Attorney and Counselor at Law
GWINN LEGAL PLLC
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Troy, MI 48084
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