New US Labor rule will increase salary level for exempt employees

U.S. Department of Labor Wage & Hour Division Guam Area Office assistant district director Patrick Candoleta and Labor Wage & Hour Division investigator Dan Wang receive plaques of appreciation from officers of the Society for Human Resource Management NMI Chapter yesterday at the Pacific Islands Club’s Charley’s. Candoleta and Wang discussed, among other things, the white collar overtime exemption rules. (Ferdie de la Torre)

The important change to the Fair Labor Standards Act White Collar Overtime Exemption rules is that it increases the standard salary level from the current $455 a week to $913 a week for exempt employees effective Dec. 1, 2016, according to U.S. Department of Labor Wage & Hour Division Guam Area Office assistant district director Patrick Candoleta.

As this developed, Candoleta also commended the CNMI’s hotel industry for doing a lot better than a couple of years back as far as federal laws and regulations regarding labor and wages.

Candoleta discussed the changes in the FLSA White Collar Overtime Exemption rules at his presentation before the Society for Human Resource Management NMI Chapter held yesterday at the Pacific Islands Club’s Charley’s.

The assistant district director said that in March 2014, President Obama issued a memorandum that requires or directed the U.S. Labor Secretary to review the overtime regulations and to make changes as necessary.

He said the notice of proposed rulemaking was issued in July 2015 and the final rule was published in May 2016.

The final rule effective date is Dec. 1, 2016.

Candoleta said one of the most common FLSA minimum wage and overtime exemption is what is often called the “EAP” or the “white collar” exemption.

He said this exemption says that if employers employed people in an executive capacity, administrative, or a professional capacity, they don’t have to pay their federal minimum wage or any overtime hour to pay for more work over 40 hours in a week.

He said a test to claim a valid or bona fide exemption under the law, is that employers must pay the employees on a salary basis; second they must pay them a salary or minimum salary level; and third, there must be job responsibilities.

“Exempt employees must meet all these three criteria,” Candoleta explained.

“What are the final overtime rule changes? Basically is that it increases the salary level for your exempt employees. It increases the salary level for your highly compensated employees,” he said.

Candoleta said it also allows employers to use nondiscretionary bonuses to satisfy a certain amount of the salary requirements and also provides automatic updates to the rules.

He said come Dec. 1, 2016, to maintain and claim a valid exemption under the FLSA in addition to the other criteria employers must pay the employees at least $913 a week.

“That comes out to about $47,000 plus a year,” he pointed out.

The new rule, Candoleta said, also increases the compensation of the employers’ highly compensated employees from a $100,000 to a $134,000 per annum effective Dec. 1, 2016.

Candoleta said there is, however, a misconception or misunderstanding that come Dec. 1, the exempt employees have to be automatically increased to $913 a week.

“That’s not true,” he said.

Candoleta said if employers want to maintain a valid exemption, then they must increase their employee’s salary to $913 a week.

He said if the employers don’t want to increase the employees’ salary and want to maintain the status quo and fall below the $913 per week, then they become non-exempt employees.

“If they work overtime, then you pay them overtime,” Candoleta said.

He said the $913 per week will apply to the CNMI as well regardless if the minimum wage here is still at $6.05 an hour. “You want to claim a valid exemption, you have to pay them $913 a week because the regulations don’t allow you to pay less than that,” Candoleta said.

Meanwhile, Candoleta praised the hotel industry for “doing a lot better.” He said he is happy to report that 12 or 15 cases involving hotels, they also saw some minor violations due to some administrative error or not understanding the law.

“In other words, we didn’t’ see any egregious that we kind of saw in the past, which is the good thing,” he said.

Candoleta said efforts to go out there to educate and work with the hotel industry has paid off.

“We are happy to report that,” he said.

He said the hotel industry as a whole, not only the Hotel Association of the NMI, can be used to be a model business in the Commonwealth.

“We are happy to report that as far as the hotel industry is concerned you guys are doing a lot of better than a couple of years back,” Candoleta said.

In an interview, Candoleta said they want to tell the business community and the employers out here again that it’s their best interest to comply with federal laws and regulations regarding labor and wages.

He said they provide this kind of outreach event to give employers that information so that they can make best decisions regarding compliance for their businesses.

“So basically we want to make sure that we get as much compliance in the employer community as we can. Compliance is our number one priority,” he added.