The Virginia Retail Federation invites Governor McAuliffe, Lieutenant Governor Northam, Attorney General Herring, Governor's Cabinet Members, Legislators and their aides to connect with Virginia retailers and the business community.
For your reading pleasure, we've taken the liberty of breaking down the good, the bad, and the ugly.
First, let's bring everyone up to speed.
In 2014, a Presidential Memorandum directed the Department of Labor (DOL) to update and modernize the regulations defining which white collar workers are protected by minimum wage and overtime standards under the Fair Labor Standards Act (FLSA).1
Subsequently, in an effort to put more money into the pockets of those deemed middle-class workers and improve the work-life balance of employees, the DOL issued its final rule making changes to the FLSA's overtime exemptions. Through this, the DOL not only seeks to update regulations but also ensure full implementation of FLSA overtime protections and simplify the identification of overtime-eligible workers. The end goal is to make exemption easier for employers and workers to understand and apply.2
So, what exactly do these new regulations entail? Here is a quick breakdown.
The Final Rule primarily focuses on updating the salary and compensation levels needed for employees to be exempt. One of its biggest components is that minimum salary requirements for exempt employees will more than double the previous salary threshold level.
To be more specific, the standard salary threshold for full-time, salaried employees is being increased from$455/week ($23,660 per year) to $913/week ($47,476 per year).3
But that's not all
In an attempt to prevent the salary levels from becoming outdated again and ensure that a certain percentage of full-time salaried workers always qualify for overtime, the salary threshold will automatically increase every three years based on wage growth over time.
FUN FACT: These changes will not allow the government to take into account economic conditions, geographic cost-of-living differences or specific impacts on certain industries.4
The final overtime rule also increases the annual compensation threshold for Highly Compensated Employees (HCE) from $100,000 per year to $134,004 per year. This threshold equals the 90th percentile of full-time salaried workers nationally and will also be increased every three years.
FUN FACT:Â The projected HCE total compensation requirement as of January 1, 2020, will equal $147,524.5
Additionally, for the first time ever, a salaried employee's bonuses and commissions can satisfy up to ten percent (10%) of the minimum threshold for overtime exemption. The catch? These incentive payments must be non-discretionary and paid on a quarterly or more frequent basis.
FUN FACT: As soon as these changes take effect, each quarter end will fall on a Friday, Saturday or Sunday, good grief.
On a more positive note for retailers, the duties test, one of the three criteria an employee must meet in order to be exempt, will remain unchanged.4
That's a lot to take in. When will these changes go into effect?
Ready or not, the deadline for these new regulations is December 1, 2016. Automatic updates to the standard salary level and HCE total compensation requirement thresholds will occur every three years, beginning on January 1, 2020.
As an employer, what are my options moving forward?
Recognizing that each circumstance will be unique, the DOL suggests various ways employers can adjust to the updated salary level. They encourage employers to choose one, or some combination, of the following options:
- Increase salaries to (at least) the new threshold and retain any affected employee's exemption status
- Pay overtime (i.e., time and a half) in addition to an employee's current salary when necessary
- Evaluate an employee's workload and realign their hours to 40/week to help reduce or eliminate overtime worked6
The outcome? Regardless of the action taken, this will ultimately change how you run your business.
Overtime expansion poses many challenges for the retail industry if these changes are allowed to take effect. Various concerns among employers include, but are not limited to: communication and morale issues, administrative burdens, regulatory risks, and a lack of opportunity to succeed in the workplace. The National Retail Federation (NRF) argues that the implementation of these rules would add to employers' costs, undermine customer service, hinder productivity, generate more litigation opportunities for trial lawyers and ultimately harm job creation.7
Thetake awayÃ for retailers? The time to act is now.
Simply put, congressional action is now the only way to stop these changes before they go into effect. Congress must pass the Protecting Workplace Advancement and Opportunity Act (S. 2707 and H.R. 4773), which would nullify this rule and require DOL to perform an economic analysis of how changes to overtime regulations will impact nonprofits, small businesses, and employers in other vulnerable industry sectors before issuing a new rule. The bill would also prohibit future proposals from including any automatic update mechanism.
Visit NRF's Action Center [online at NRF.com/Advocacy/Action-Center] to quickly and easily send an email to your members of Congress to ask that they cosponsor this important workplace legislation.4
In the meantime, looking for more information?
We know the questions don't end here. Be sure to utilize the many resources available on NRF.com to help prepare your business for the impact of these regulation changes. Remember, as a VRF and RMA member you have free access to these items. Additionally, the VRF team is available for any lingering questions and stay tuned for more information coming from RMA about an Overtime Rule workshop.
NRF will host a members-only webinar on the U.S. Department of Labor's recent overtime regulations. As a VRF member, you have exclusive access to this webinar.
The webinar will include a panel discussion moderated by Ogletree Deakins, a leading labor and employment law firm, and featuring panelists from Macy's, Express, QVC and other companies. The panel will discuss the practical implications of the new regulations for retailers and what you should be doing to prepare for the changes moving forward.
Participants will have an opportunity for Q&A towards the end of the session. Please register and join for an insightful discussion on this major development!
2016 NATIONAL RETAIL FEDERATION RETAIL ADVOCATES SUMMIT Your VRF team just returned from a successful trip to the 2016 National Retail Federation Retail Advocate Summit in Washington, D.C. last week. There we met with many of Virginia's representatives, including Representative Bob Goodlatte, Senator Tim Kaine's staff, Representative Dave Brat, Representative Scott Rigell's staff, and Senator Mark Warner's staff.
TOPICS OF DISCUSSION During this Summit on Capitol Hill, we discussed several issues that impact the retail industry. Most frequently discussed were the new Overtime rule issued by the Department of Labor and the E-fairness issue.
- New Overtime Rule
The Department of Labor set the new salary threshold for full-time salaried workers at $47,476 ($913/week). This is more than a 100% increase from the current salary threshold of $23,660 ($455/week).
This means... Employees making below the $47,476 threshold will now have to be converted to hourly and be paid overtime for any time they work beyond the 40-hour workweek.
The impact... We explained that this not only will have a negative impact on our members, but it will also negatively impact employees of our members. This new rule reduces workplace flexibility, damages employee morale, and limits career advancement opportunities. In addition, many employers may be forced to reduce a current employee to part-time and hire a second part-time employee to do the job of one person, in order to avoid paying overtime. It is important to note that the new Overtime Rule is going to negatively impact many industries, not just retail. For example, it will have a harmful impact on non-profits, universities, public sector governments and many others serving our communities. - E-Fairness We continued to drive home how huge e-fairness is for our members; emphasizing that with the constant growth of online sales, the disadvantage to brick and mortar retailers will continue to increase.
Best option... While there are three different Congressional proposals for addressing the inequity in the tax treatment of online versus brick and mortar retailers, we believe that Representative Chaffetz's bill is the best for our members. The Remote Transactions Parity Act permits states to authorize a collection of sales tax by remote sellers if the state is either a member of the Streamlined Sales and Use Tax Agreement or if it adopts certain minimum simplifications.
What it will require... RTPA requires that states fund the provision of free software to remote sellers. This software would calculate and remit sales tax, file sales tax returns and respond to audit request from state and local governments.
Taking matters into their own hands... We also noted that many states have decided to take the matter into their own hands and enacted legislation on this issue. In fact, 22 states have passed or are considering enactment of legislation creating nexus so that they can require remote sellers to collect taxes.
EDUCATIONAL OPPORTUNITY - coming soon NRF is hosting a webinar on the Overtime Rule in the coming month. Please make sure to participate in this webinar in order to have a better understanding of the impact the new rule will have on your individual business. Stay tuned for more details.