ASA Member Bulletin - Aug 2017 - Got Outside Sales Personnel? You Have a Chance to Tell the Labor Department When You Should be Required to Pay Them Overtime
The Labor Department is seeking comments on an overtime rule - one that affects overtime payments to outside sales personnel and to administrative and executive personnel. This is a rule that could dramatically change the pay structure of certain distributors, and is worth the attention of ASA members.
The Fair Labor Standards Act (FLSA) generally requires covered employers to pay their employees overtime premium pay of not less than one and one-half times the employee's regular rate of pay for any hours worked over 40 in a workweek. But there is an important exception that exempts "any employee employed in a bona fide executive, administrative, or professional capacity ... or in the capacity of outside salesman ..." These personnel are known as "exempt" personnel, and they are not subject to the FLSA protections. Thus, outside sales personnel do not have to be paid overtime. This allows outside sales personnel to be paid based on productivity rather than hours of effort (e.g. commission) where that compensation mechanism is appropriate.
In May 2016, the Labor Department under President Obama issued a new rule that would extend overtime benefits to many employees who did not previously enjoy those benefits. The Administration had bragged that this will automatically extend overtime pay protections to over 4 million workers who did not previously have this entitlement.
The Obama Administration proposed to add new tests that would have extended overtime pay to many categories of personnel (including outside sale personnel). The new tests included a salary-level test and an automatic updating mechanism which would have extended the standards found in FLSA. In November, a Federal Court stopped the rule from being implemented. The Court concluded that the overtime exemption statute (29 U.S.C. § 213(a)(1)) was plain in its language, and did not permit the Department of Labor to add tests that undermined those exemptions.
The Trump Administration has pledged to dismantle many of the programs established by the Obama Administration, and this is the next one to potentially face the chopping block.
On February 24, 2017, President Donald Trump signed Executive Order 13777, "Enforcing the Regulatory Reform Agenda," that directed federal agencies to identify regulations for repeal, replacement, or modification.
The overtime rule has been enjoined from enforcement, but it is still on the books. It makes sense to revoke it, consistent with the Executive Order. But you cannot just waive a magic wand and be rid of a regulation - it must be rescinded using the same Administrative Procedures Act process that was used to enact it. The Department of Labor has potentially started this process.
The Department of Labor has put out a request for information in which they are seeking comments on the overtime provision. The call for comments includes a list of questions, but any comments on the overtime provisions are welcome. The list of questions includes questions about reforming the overtime provisions in order to make them acceptable.
Written comments should be sent to the Department on or before September 25, 2017. Please let ASA know your concerns, as well, so our comments can reflect your concerns.