Industry Companies Wrestle With New Federal Overtime Requirements
The Fair Labor Standards Act’s (FLSA) new overtime requirements, set to go into effect on December 1, raise the salary amounts employees need to be paid to qualify as exempt, increasing the minimum salary threshold from the current level of $455 per week to $913. Although PPAI has lent its support to bipartisan legislation in the House and Senate that would delay and provide relief for the new rules, promotional products companies are already moving to come into compliance with the change in requirements.
Compliance with the FLSA’s requirements has pushed companies to reconsider their time management systems, employee manuals and practices, and how they classify their employees.
“We sent an initial communication in September to all employees advising of the Department of Labor’s upcoming change with a brief explanation,” says Dawn Conway, president of Dayton, Ohio, distributor Shumsky (UPIC: SHUMSKY). “In November, we met with the supervisors of individuals affected by this change and they were responsible for communicating to each employee how the change will affect him or her. They also reiterated that the change is effective the beginning of the pay period in which December 1 falls.”
With the myriad ways staff can be classified within an organization—hourly or salaried employees, independent contractors, etc.—how industry businesses are confronting the FLSA’s changes is highly dependent on their situation.
“We have moved all of our salaried people to a level that is demonstrably higher than the legal limit,” says Rod Brown, CAS, chief financial officer of Pleasanton, California, distributor MadeToOrder (UPIC: mto). “Their compensation is a composite of base salary and commissions; however, salary accounts for most of it. While their salary is not above the legal limit, coupled with guaranteed commissions they are above that level.”
Brown adds, “We have taken those team members off a time clock and are moving to smart sheets to track their PTO accruals. Hourly staff continue to be on time clock software and all overtime is calculated according to local and national laws. Many of our hourly staff do earn measurable overtime.”
At issue for some industry distributors is whether they can classify their inside sales representatives as exempt under the outside sales exemption. How companies are accommodating this varies based on their structure and operations. Gregg Emmer, vice president and chief marketing officer of Batavia, Ohio-based distributor Kaeser & Blair, Inc. (UPIC: KAESER), notes, “We have no inside salespeople. All the people we designate as ‘K&B Dealers’ are independent business owners who hire K&B to provide distributor services for them.”
Conway adds, “We are classifying sales reps under the administrative exemption. Neither the outside sales exemption nor the FLSA’s Section 7(i) applied to us.”
Section 7(i) creates an exemption that applies to retail or service establishment employees who receive more than half of their total earnings in the form of commissions and whose regular pay exceeds one and a half times the minimum wage for every hour worked in a work week in which any overtime hours are worked.
PPAI is monitoring the issue and will work with fellow members of the Partnership to Protect Workplace Opportunity to support legislation that limits the impact of these new rules on employers and employees nationwide. Industry members can add their voice to PPAI’s in taking this message to the Senate by clicking here.