ABA Banking Journal - May/June 2015 - (Page 60)
> OPERATIONS
Changes in Overtime Exemption Standards
BY STEVEN S. GREENE
THE DEPARTMENT OF LABOR is
preparing to issue regulations that
are expected to dramatically change
overtime exemption standards,
causing many employees to be
reclassified to non-exempt status.
These regulations will have a
particularly significant impact on the
banking industry.
Last March, President Obama directed
the secretary of labor to review
and propose revisions to overtime
exemption regulations. The president
advised that the regulations were
outdated and, therefore, "millions
of Americans lack protection of
overtime." The Department of Labor
then began a review process with the
clear objective to limit application of
federal overtime exemptions. During
its evaluation, the department met with
major business, human resources and
compensation associations including,
in November, banking industry
representatives. It became obvious
that the department was looking
for ways to generate a significant
reclassification of exempt employees.
The new standards are expected to
call for an increase in the salary level
required for exempt status from the
current $455 per week to a figure
in the $800 range. The department
justifies this dramatic increase by
arguing that in 1950, when the salary
threshold was initially established,
the weekly salary level was $844,
adjusting for inflation.
The new regulations also will
introduce a new "duties" test for
executive, administrative, professional
and computer professional
exemptions. Currently, an individual
60
ABA BANKING JOURNAL | MAY/JUNE 2015
may qualify for the executive
exemption if their "primary duty"
involves managing a recognized
subdivision of the bank. The key
term is "primary duty," which for 65
years has meant "the principal, main,
major or most important duty that
the employee performs." In the past,
employees who devoted a minority
of their work time to exempt work
routinely would have satisfied the
primary duty test.
week. The job analysis will need to
distinguish between tasks considered
exempt by federal regulators and
tasks they view as non-exempt. Job
descriptions will need to be updated,
and it will be advantageous to reflect
bank-expected time allocations in
the body of those job descriptions.
After conducting these job analyses,
we anticipate that the industry
will find many positions requiring
reclassification as non-exempt.
Consider the branch manager at a
location, with four direct reports.
That person may devote 30 percent
of his/her work time to management
responsibilities and 70 percent to
lending, customer service and tasks
similar to those done by others at the
branch. Under current standards, that
branch manager would qualify for the
executive exemption.
The Department of Labor release will
consist of "proposed" regulations. The
federal agency will solicit comments
and feedback. However, we do not
anticipate any meaningful changes
to these standards. The objective
has been clearly articulated: to cause
employers to reclassify individuals to
non-exempt status. The government
will want to implement the regulations
quickly, as President Obama's term
comes to a close. Once implemented,
regulations become difficult to change;
future administrations are typically
reluctant to "roll back the clock."
The new "duties" test is expected to be
absolutely quantitative: Individuals are
exempt only if they devote a specific
percentage of their actual work time to
exempt responsibilities. We expect the
proposed percentage to be at least 51
percent of actual work time.
If the branch manager does devote
30 percent of his/her time to
management, and the remaining duties
are considered non-exempt by the
Department of Labor, then-as absurd
as it sounds-that position would need
to be reclassified as non-exempt with
the branch manager earning overtime
for time worked in excess of 40 hours.
Under the new duties test, banks will
need to evaluate current positions by
performing a job analysis of what work
is actually performed or expected each
These changes will have a significant
impact on community banks'
financials, staffing, responsibilities and
human resource management. For
that reason, we believe that human
resource professionals will need to
study the new standards, conduct job
analyses and begin to advise senior
management regarding how to mitigate
the considerable impacts.
STEVEN S. GREENE is
president of Employment
Law Compliance, Inc. Visit
employlawcompliance.com.
http://www.employlawcompliance.com
Table of Contents for the Digital Edition of ABA Banking Journal - May/June 2015
CHAIRMAN’S VIEW
UPFRONT
ECONOMIC OUTLOOK
LEGAL BRIEFS
PICTURE THIS
CELEBRATING A TRADITION OF INNOVATION
SOUND RISK CULTURE
AN INTERVIEW WITH FDIC’s MARTIN GRUENBERG
NEW RESPA/TILA MORTGAGE DISCLOSURES
BANK DOMAIN ROLLOUT
INVESTOR PERSPECTIVE
MARKETING/RETAIL
PAYMENTS
ADVOCACY
ABA COMPLIANCE CENTER INBOX
CYBERSECURITY
MORTGAGES
OPERATIONS
BOARD MATTERS
FROM THE STATES
BANKER RECOMMENDED READING
INNOVATIONS IN SOCIAL RESPONSIBILITY
INDEX OF ADVERTISERS
ABA Banking Journal - May/June 2015
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