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AGC Opposes Salary Threshold Increase to $50,440 in Proposed Overtime Rule

On September 4, AGC submitted comments to the U. S. Department of Labor’s Wage and Hour Division (WHD) regarding proposed changes to the overtime regulations under the Fair Labor Standards Act (FLSA).  If implemented, the proposed rule would increase the salary threshold for the executive, administrative and professional exemptions from $455 per week ($23,660 per year) to $970 per week ($50,440 per year) – an increase of more than 100%.  The threshold for highly compensated employees would also increase from $100,000 per year to $122,148 per year.  Both thresholds would be adjusted annually based on one of two proposed methods.

The White House has stated that the proposal “would guarantee overtime pay to most salaried workers earning less than an estimated $50,440 next year” and will result in higher wages for such workers.  A survey of AGC members, however, indicates otherwise.  When asked during a recent survey how companies would comply with a new threshold at the proposed level, 74% of AGC-surveyed construction contractors responded that they would likely reclassify some or all of the impacted exempt workers to a non-exempt hourly status at their current salaries.  The survey results also show that:  over 60% of respondents expect the proposed rule to result in the institution of policies and practices to ensure that affected employees do not work over 40 hours a week, 40% expect affected employees to lose some fringe benefits, 33% expect some positions to be eliminated, and 23% expect to exchange some full-time positions for more part-time positions.  Furthermore, about 80% of respondents expect employee morale to be damaged because employees who are reclassified to hourly, non-exempt status will feel as if they have been demoted despite eligibility for overtime pay.

The concerns of AGC member companies were expressed via joint comments submitted by the Partnership to Protect Workplace Opportunity coalition; a diverse group of associations, businesses, and other stakeholders representing employers with millions of employees across the country in almost every industry.  The coalition’s letter asks WHD to: 

  • Lower the proposed minimum salary threshold to account for regional economic and market differences; lessen the impact on an employee’s ability to work in a part-time exempt capacity; and lessen the impact on employee compensation, flexibility and morale; 
  • Allow bonuses and commissions to count toward the minimum salary threshold;
  • Phase any salary increase in over time;
  • Leave the minimum required salary threshold for application of the Highly Compensated Employee exemption at $100,000;
  • Abandon the proposal to automatically increase the salary threshold;
  • Keep the current duties test in place for now;
  • Do not adopt California law or any other percentage of time requirement for the duties test;
  • Do not re-implement the short- and long duties test model;
  • Do not make revisions to the concurrent duties roles; and
  • Re-evaluate the economic analysis of the proposed rule.

AGC also submitted an independently-drafted letter to highlight the impact that the proposed rule would have in the construction industry as expressed in the AGC survey results.  AGC will continue to monitor developments and will notify members once final regulations are issued.  For more information on the proposed rule, click here

 

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