On May 18, 2016 the overtime exemption rule was updated by the US Department of Labor under the Fair Labor Standards Act (FLSA). Effective December 1, 2016 the salary threshold, determining who is eligible for overtime pay, will increase from $23,660 to $47,476 per year. This threshold is scheduled to be updated every three years and is estimated to have an impact on nearly 4.2 million workers at this point.
How will this work?
Workers meeting the minimum annual income and performing certain types of administrative, executive or professional work qualify for a salary and are exempt from overtime pay. Workers who earn less than the income threshold must be paid an hourly wage and be paid time-and-a-half for any hours they work above 40 hours per week. The threshold may be met either 100% by wages or by wages plus up to 10% incentives/bonuses that are paid at a frequency of quarterly or better.
How will employers deal with this?
The challenge for employers is in determining the hourly rate for workers who are currently being paid a salary that falls well below the new threshold. This is especially difficult if they have been working more than 40 hours per week inconsistently. Also, for employers to consider, is the problem of two workers who have the same job classification with one currently being paid a salary just short of the new threshold and another that isn’t nearly as close to the threshold. You can’t simply increase the one to a slightly higher salary and convert the other to hourly while only giving overtime to the salaried worker. This would not work! Businesses have a lot of issues to consider relating to this topic before December 1st rolls around. They need to control expenses while being fair to employees.
So, how will this affect trucking?
Dispatcher and operations personnel are expected to be impacted primarily in the industry because their duties qualify them for the administrative exemption and their income exceeds the previous threshold for overtime. Now many of these personnel will need to be converted to hourly pay with overtime pay whenever they exceed 40 hours per week.
On the other hand, there are many workers in the industry that are exempt from the FLSA rules. They fall under the Motor Carrier Exemption in the FLSA because their wage and hour regulation is handled by the Department of Transportation. Their exemption rules are covered by the Safe, Accountable, Flexible, Efficient Transportation Equity Act (SAFETEA). This act exempts motor carrier employees who operate a “commercial motor vehicle” (one that weighs over 10,000 pounds both loaded and unloaded). These drivers, driver’s helpers, loaders or mechanics, whose duties affect the safety of the operation of motor vehicles that meet this weight limit and transport goods for commercial purposes, are all exempt under FLSA.
So for now, the trucking industry will be impacted by FLSA in their office operations and not out on the road. Stand by to see what other changes will come to trucking in the future.