Canadian Payroll Reporter

6 Canadian HR Reporter, a Thomson Reuters business 2015 News August 2015 | CPR to overtime pay under its Fair Labor Standards Act (FLSA). U.S. President Barack Obama says the changes would extend overtime pay to almost five mil- lion workers. The FLSA covers most em- ployees in the United States regardless of the state in which they work. Exceptions apply for employees and employers in states that have their own labour standards laws that are stricter than the FLSA. Under the FLSA, workers are entitled to overtime pay of at least 1.5 times their regular rate if they work more than 40 hours a week unless they are ex- empted. The act exempts various types of workers from over- time pay, including salaried white-collar workers who earn at least $23,660 a year (or $455 per week) and whose job duties primarily involve executive, ad- ministrative or professional du- ties defined in regulations under the FLSA. The Labor Department is proposing to raise the exemp- tion threshold by replacing the specific dollar amount that currently applies with a new measure that sets the threshold at a salary level equal to the an- nualized weekly earnings of the 40th percentile of all full-time salaried workers in the U.S. For 2015, this would raise the salary threshold to $47,892 a year (or $921 per week). The department estimates the threshold would rise to about $50,440 a year (or $970 per week) next year. The department is also pro- posing to change a total annual compensation threshold that exempts "highly compensated employees" from overtime pay if they meet a job duties test that classifies them as executive, ad- ministrative or professional em- ployees. The threshold is currently set at $100,000 (this includes a min- imum salary of $455 per week, plus other compensation such as commissions and bonuses). The department proposes to set the threshold so it equals the annualized weekly earnings of the 90th percentile of all full- time salaried workers (about $122,148 per year). It also proposes to implement a mechanism to automatically update the thresholds every year. This could include using a fixed percentile of wage earnings or the consumer price index. The last time the department changed the salary threshold was in 2004. That was the first change since 1975. As a result, Obama says the thresholds have not kept up with inflation. Citing figures from non- profit, non-partisan think tank the Economic Policy Institute (EPI), the White House says 40 years ago, 62 per cent of full-time salaried workers were eligible for overtime pay under the salary threshold. Today, only eight per cent qualify. The institute has been calling on the U.S. government to raise the threshold to at least $50,000 a year. In a news release, the or- ganization applauded Obama and Labor Secretary Thomas Perez for their actions. "It will boost wages, which have been largely stagnant for the past three and a half decades (and) create hundreds of thou- sands of jobs," said Ross Eisen- brey, vice president of the EPI. While the National Em- ployment Law Project, a not- for-profit organization that advocates for low-wage and un- employed workers, praised the proposals, it was concerned the draft regulations did not include changes to "duties" tests the department uses to determine whether salaried workers earn- ing more than the threshold are exempt from overtime pay. To qualify for an overtime pay exemption, an employee must meet both the salary threshold and duties test requirements. "We are concerned that fail- ure to address the existing tests' vague definitions, laissez-fair approach to the mix of 'salaried' and 'hourly' duties required for exempt status, and other short- comings threatens to deny far too many workers the overtime- pay protections they deserve and the statute contemplates," said executive director Christine Owens in a news release. Owens added that final regu- latory changes must include spe- cific reforms of the duties tests, such as clarifying that exempt workers cannot spend more than half of their time on non- exempt work. However, the National Retail Federation (NRF) says the new rules could cost jobs and hurt retail and restaurant businesses. "The plan to revise the over- time rules could cost businesses hundreds of millions of dol- lars while increasing inequal- ity across the board," said David French, senior vice-president for government relations at the NRF, in a news release earlier this year. "It would help very few work- ers while negatively impacting a large segment of our economy and workforce," he added. An NRF-commissioned re- port found that a change in the salary threshold could cost res- taurant and retail businesses more than $5 billion. French said new overtime rules could also result in a de- crease in employee benefits and compensation and an increase in businesses using part-time and hourly workers. He noted that this would hurt career opportunities for workers wanting to move into manage- ment positions since companies would likely replace middle- management jobs with hourly and part-time positions to save costs. "There simply isn't any magic pot of money that lets employers pay more just because the gov- ernment says so," French said af- ter the proposals were released. It is not yet known when the final regulations will be in place, although there are indications that it could be next year. The Labor Department has asked for public feedback on the proposals by early Sept. Canadian changes In Canada, some provinces are considering employment stan- dards changes that may include amendments to overtime rules here. In Ontario, the provincial government recently launched public consultations on ways to amend the province's Employ- ment Standards Act, 2000 (ESA) and the Labour Relations Act, 1995 to reflect changes in the way people work. The consultations are looking at workplace trends such as an increase in temporary jobs, part- time work and self-employment, as well as technological change and the rising prominence of the service sector. The consultations began in mid-June and will last until mid-September. One area in which workers' rights advocates would like to see employment standards re- forms are in overtime require- ments. In a preliminary submis- sion to the consultations, the Ontario Federation of Labour (OFL) said employees should be entitled to overtime pay or time off in lieu after working 40 hours a week. Currently, overtime pay is re- quired after 44 hours a week. The Workers' Action Centre, a worker-based organization in Toronto that provides informa- tion and rights advice to people in low-wage and unstable em- ployment, is also calling for the ESA to require overtime pay or time off in lieu after 40 hours of work per week. In a recently released report called Still Working on the Edge: Building Decent Jobs from the Ground Up, the organization said, "Ontario lags behind other jurisdictions in Canada that have established a shorter workweek of 40 hours per week with over- time thereafter." Both the Workers' Action Centre and the OFL also want the government to eliminate exemptions and special rules under the ESA, some of which affect who is entitled to be paid overtime. "Exemptions to overtime rules over the past five decades have resulted in just three out of five Ontario workers (62 per cent) Ontario lags behind other jurisdictions: Report from OVERTIME on page 1 see page 8 "Exemptions to overtime rules over the past five decades have resulted in just three out of five Ontario workers with full coverage under the ESA."

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