Working Overtime
May 25, 2016

FINAL RULE

President Obama and Labor Secretary Tom Perez announced the Department of Labor's final ruleupdating the overtime regulations for exempt employees, which set the salary threshold which employees must get overtime at $47,476 — up from $23,660 under the current rules.  Salaried employees (classified as executive, administrative, and professional) paid less than the threshold will be entitled to overtime pay on any work beyond 40 hours per week.  The final rule will go into effect on December 1, 2016.

HAVEN'T WE BEEN TALKING ABOUT THIS FOR A WHILE?

President Obama first directed Labor Secretary Perez in March 2014 to update the overtime regulations to reflect the intent of the Fair Labor Standards Act (FLSA), which provides basic rights and wage protections to American workers, including the federal minimum wage and overtime requirements.  The Department of Labor published a Notice of Proposed Rulemaking in July 2015 and asked for written comments by September 2015.  The Labor Department received over 270,000 comments, which helped shape the final rule.  The rule updated the threshold requirement but did not make any changes to the duties test for executive, administrative and professional employees.  The salary threshold will automatically update every three years.

IMPACT ON WORKERS

The Department of Labor estimates 4.2 million salaried workers will be affected based on their salaries.  The current salary threshold affects only 7% of salaried employees whereas the new $47,476 threshold will affect 35% of salaried employees. As a result of this rule, an extra $1.2 billion a year will be paid to employees.  The final rule also clarifies that millions more salaried employees have already been eligible for overtime but haven't been getting paid.    

IMPACT ON BUSINESS

Some business owners argue that raising overtime eligibility would encourage more employers to classify their employees as hourly, which could reduce those employees' non-wage benefits.  Some colleges worrythey will have to cut services or raise tuition.  Other industries argue it's too early to say how the rules will affect business.  The Labor Department provided separate general guidancenon-profit guidance, and high education guidance.  We will continue to follow the impact of the overtime rule on industry as it develops.

"TOO BIG TO FAIL" INSURANCE RULES COMING SOON

FEDERAL RESERVE

Federal Reserve Governor Daniel Tarullo announced the Federal Reserve will soon propose rules on insurer capital requirements for too big to fail insurance companies that can threaten the U.S. financial system.  Tarullo commented that too big to fail U.S. insurers would get regulations that evaluate their capital in a relatively simple set of risk categories and would be more appropriate for the longer-term nature of most insurance liabilities.  He also noted that compliance costs should be considerably lower than if the insurers had to conform to the bank holding company capital regime.  

SIFIS

Under the 2010 Dodd-Frank Act, certain non-bank financial institutions can be designated as systemically important (SIFIs) and are subject to tougher capital, liquidity, and other rules.  Recently MetLife challenged its designation as a SIFI and won in the U.S. District Court in D.C.  The Treasury Department has appealed the decision. Although too early to tell, designated-SIFI, Prudential, is optimistic that the rules will reflect the right considerations for insurance.  The advance notice of proposed rulemaking will be in the "coming weeks" and will seek public comments.  

MAKING OUR WAY AROUND THE COUNTRY

ARKANSAS

The Arkansas Legislature passed H.B. 1010 in which the Arkansas Workers' Compensation Commission's Death and Permanent Total Disability Trust Fund (the Fund) will only continue taking new claims until June 30, 2019.  The Fund pays the permanent disability and death benefits of injured workers after the workers' compensation insurer or self-insured employer has paid the retention amount.  The premium tax would remain at 3% until all the Fund's claims are paid at which point the premium tax would be limited to 1.5%.  The bill is awaiting Governor Asa Hutchinson's signature.

UTAH

The Utah Supreme Court struck down an attorney fee schedule for workers' compensation cases as unconstitutional.  The case challenged the sliding-scale fee and the fee cap established by the Utah Labor Commission.  The schedule had set attorney fees at 25% for the first $25,000 of the award, 20% for the next $25,000, and 10% for awards over $50,000.  The fee cap was at $18,560.  The Court concluded that the regulation of attorney fees falls under their jurisdiction and they cannot delegate that power to the legislature or the Labor Commission.  Utah is yet another state to rule workers' compensation attorney fee schedules unconstitutional.

MEMORIAL DAY

This weekend as you fire up your barbeque, attend a parade or watch the Indy 500, please remember the veterans who gave their lives for our nation.

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