Major Impact Expected from Proposed Overtime Rule

The Department of Labor (DOL) has proposed increasing the salary levels required for being exempt from overtime rules regarding pay and benefits. As proposed, the rule would more than double the minimum salary levels required for the law’s white collar exemptions. NLBMDA is concerned about the rule and submitted comments on the proposed rule about the negative effects it could have on the ability of lumber dealers in structuring hours and career advancement opportunities for its employees.

Federal law requires most employers to pay employees at least the minimum wage, and to provide overtime pay at a rate of time-and-a-half for any hours worked in excess of 40 per week. However, some employees are exempt from its overtime protections if they meet certain job duties tests and receive a minimum weekly salary.

DOL has proposed revising the regulations relating to the most important of these exemptions for executive, administrative, professional, outside sales and computer employees (EAP)—known generally as the “white collar” exemptions. At present, the white collar salary level exemptions are $455 per week ($23,660 per year). Under the proposed rule, the minimum salary level required for the EAP exemptions would more than double, with the standard salary level rising to $970 per week ($50,440 per year).

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Overtime Rule’s Far Reaching Impact
Employees of NLBMDA-member companies involved in sales and operational management will be affected by the proposed rule. Regardless of whether management staff works in lumberyard operations and/or retail operations, the proposed salary level for EAP employees will cause a substantial portion of the workforce to be incorrectly categorized as exempt employees. This would reduce the flexibility of staff at lumberyards and make operations less efficient.

Under the duties test, the management staffs of NLBMDA-member companies currently qualify as exempt employees. Since 2004, the duties tests for EAP personnel have not included a limit on the amount of time that an employee can spend on nonexempt duties before the exemption is lost. DOL’s Wage and Hour Division (WHD) has offered no rationale in considering changes to the duties test other than to say that some commenters may have ideas to offer.

The proposed rule also fails to sufficiently take into consideration the regional economic differences in wages. By setting minimum salary exemption so high, the exemption level may effectively be eliminated for low-cost-of-living areas. NLBMDA believes that the current levels in fact do represent appropriate thresholds for EAP employees.

It is unclear how the rule would affect employers’ ability to sustain current workforce levels; however, the proposed increases to the salary level exemptions would have a substantial impact on all businesses, in particular small businesses, and may discourage them from hiring additional employees.