Fleet Management

What the Labor Department's New Overtime Rules Mean for Trucking

July 2016, TruckingInfo.com - WebXclusive

by Alexander L. Maultsby

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In May, after years of build-up, the United States Department of Labor published new regulations that will affect who may be paid a salary and who must be paid by the hour. The changes, which take effect December 1, 2016, dramatically change the landscape for employers.

But first, what has not changed? While many employers do not realize it, the law has always required that employees do certain types of work before the employer is allowed to pay them a flat salary without paying extra for overtime. Generally, those duties fall under the headings of administrative, executive, or professional work.

Without going into a detailed analysis of what kinds of jobs fall under those categories, broadly speaking these employees are supervisors of two or more employees, managers of operations who use their own judgment and discretion to make important decisions, or employees whose jobs require some advanced educational degree. Being an office worker or carrying a Manager title, for example, does not necessarily mean one may be paid a salary.

If an employee has the right duties—say, a Safety Manager who researches, designs, and implements an overall driver safety program—then the employer may pay him or her a salary, as opposed to an hourly rate of pay that fluctuates based on hours worked. This is where the new regulations come into play. Until December 1, that salary may be as low as $455 per week, or $23,660 per year. On December 1, that amount will jump all the way to $913 per week, or $47,476 per year.

So, unless a person is paid a salary at the rate of at least $47,476 per year, he must be paid by the hour and must be paid 1.5 times his hourly rate when he works over 40 hours in a workweek.

There is only one slight twist:  employers may use bonuses and incentive payments (including commissions) to satisfy up to 10 percent of that $47,476, if these extra payments are paid at least quarterly. Stated otherwise, if an employer pays a bonus or commission at least quarterly, and the bonus or commission payments add up to at least $4,747 over the course of a year, then the employer need only pay a salary of $42,729. Note that this rule is not satisfied if the employee merely has the opportunity to earn that $4,474, but only if the employee is actually paid the $4,474.

As a reminder, the new regulations did not do away with the requirement that employees perform what has always been considered exempt work. Therefore, to be exempt from overtime, the employee must do the administrative, executive, or professional work that has always been required AND must receive the new enhanced salary—either (1) at least $47,476, or (2) at least $42,729 plus an annual total in bonuses or commission, paid quarterly or more often, to reach the new level.

The upshot of the new law is that employers need to look at every salaried individual paid less than $47,476 per year and ask whether he or she should receive a raise to that new level or should become paid on an hourly basis. As simple as the new threshold is to understand, the decisions it requires of employers are not easy.

For example, consider a dispatcher whose pay is $45,000 because he is a ten-year employee and a newly hired dispatcher whose pay is $37,000. Raising the pay of the senior employee who is only $3000 away from $47,476 and converting to hourly pay the employee who is nearly $11,000 away seems financially sensible. However, that approach would mean two employees with the same job, doing the same work, would be paid under different schemes. The newer dispatcher would need to keep time records while the other would not—disadvantage for him. However, the senior employee might be asked to work all of the overtime, for no more pay—disadvantage for him. Obviously, what might look like an easy fix can carry complications for employee relations.

Moving an employee to hourly status, of course, means his or her pay will fluctuate as he or she works more hours one week and fewer hours the next. If overtime is well-defined and predictable, an employer can calculate an hourly rate that will yield the same overall pay the employee now receives. However, the more that overtime changes from week to week, the more difficult it will be to make the conversion to hourly pay without affecting overall compensation. And, of course, controlling the hours of employees who work remotely requires careful management.

There is some good news for employers: examining the impact of the new salary threshold can create an opportunity for employers to address what might be existing problems. In looking at whose pay needs to change, employers might find that employees are presently misclassified. That is, some current employees might be receiving a salary without doing exempt work. Where those mistakes exist, they can now be corrected—with an explanation that the change is triggered by the new regulations' enhanced salary threshold.

Overall, these DOL-mandated changes will require good communication with employees to explain the reasons for the changes and, for some workers, the impact of moving from salaried to hourly status. In the end, employers and employees both will need to accept some degree of uncertainty and be flexible as a new pay scheme takes root.

Reposted with permission from the law firm Smith Moore Leatherwood. Alexander Maultsby is with Smith Moore Leatherwood, specializing in transportation issues.

Comments

  1. 1. Cliff Downing [ July 06, 2016 @ 03:23AM ]

    The Government is like festering puss wound... it is the gift that keeps on oozing.

  2. 2. MC [ July 06, 2016 @ 06:42AM ]

    FINALLY! Something that the feds did that makes sense! For too long, employers have been milking the "exempt status" rules for free overtime while people work their butts off for peanuts. It's about time that the rules are used for their original intended purposes- executives, managers (regional and above) and/or professionals that travel a lot or work from home. It was never meant to make non-management workers put in 50-60+ hours per week for $25k/year.

  3. 3. Trucking Advisor [ July 11, 2016 @ 06:49AM ]

    This article is very misleading. According to the Department of Labor's website, a company does not have to convert an employee to hourly pay if they make less than $47,476. The website's question and answer section mentions this specifically: 10. Q. Must employees earning below the new level be converted to hourly pay?
    No. Nothing in the FLSA or in the regulations governing the white collar exemptions requires employers to pay overtime-eligible employees on an hourly basis. There are millions of salaried employees (white and blue collar alike) who are legally entitled to overtime pay under the current regulations. Please revise the story as not to mislead trucking companies any further.

  4. 4. JW IN THE DESERT [ July 16, 2016 @ 03:35PM ]

    JUST ANOTHER SOCK PUPPET OVER REACH.

  5. 5. Kenny Martinez [ July 29, 2016 @ 02:04AM ]

    So are hourly drivers gonna get overtime or not?? Currently my company is exempt because they operate at least 1 truck based out of California over state lines at least once every 6 months. But they recently converted all California drivers to 80 hour intrastate HOS. Which means were not allowed to operate outside of Cali? So how can they still be exempt? Thats what im not getting an answer to

  6. 6. K Hettinger [ October 31, 2016 @ 05:55PM ]

    Hopefully this will push the trucking industry to a shut down.. When these 70 hr a week drivers see their 45hr a week dispatcher is making just as much if not more money than they are. I've drove class a for 20 years. Seen first hand how none of the drivers work together. All about themselves. My grandfather paid his drivers the same wage I make today in the mid 1980s. The only people who refer to us as professional drivers are the truck stops whom financially take advantage of truck drivers. The government refers to us as unskilled laborers. One day is all it will take to collapse this economy without trucks. Maybe you can climb up in my 100ft 80,000lb smooth bore sulfuric acid tanker if an when we decided we've had enough. It doesn't take any skill we're unskilled laborers remember. If you decide to please let me know so I make sure me an my family's off the road lol. I guess what I'm saying is don't forget who butters your bread. My dispatcher will not make what I make to work half a day of facebooking.. Not of my back!

  7. 7. D.Schnerr [ November 04, 2016 @ 06:11AM ]

    So this doesn't change anything for intra-state drivers? They can be paid salary so long as it's above the min wage plus OT for hours worked?

  8. 8. Chuck [ November 11, 2016 @ 12:01PM ]

    I'm confused, my bosses say this does not affect us.

  9. 9. dean coates [ January 30, 2017 @ 02:54PM ]

    My boss doesn't allow his drivers to know how their pay is calculated. He simply says it's a "trade secret"!

  10. 10. Fern [ March 22, 2017 @ 10:25AM ]

    I've got a question, can an employer legally deduct a late fee from my paycheck without authorization?

  11. 11. Jason [ June 05, 2017 @ 03:10PM ]

    I'm hourly and work 60hrs a week and company does not pay overtime, it's a very large trucking company! Any help on this and how to go about fighting.

  12. 12. Kion [ July 11, 2017 @ 05:49AM ]

    I am also in the same boat, i work as a local truckdriver and drive 60 plus hours a week, and the company is a large company and doesn't pay OT, what is the solution to this? Are we suppose to get overtime or not?

  13. 13. Rob [ July 29, 2017 @ 07:05PM ]

    I'm also a local truck driver and my company says that anything over 45hrs is overtime for truckers. Is this true or am I loosing 5hrs of overtime?

  14. 14. ralph jackson [ August 01, 2017 @ 07:40PM ]

    I AM A DIESEL MECHANIC IN VIRGINIA...HAVE BEEN FOR ABOUT 30 PLUS YRS...I DON'T UNDERSTAND WHY THE TRUCKING COMPANY WON'T PAY OVERTIME...PLEASE HELP

  15. 15. Brian [ August 15, 2017 @ 07:58PM ]

    Ive worked in trucking industry for over 16 yrs and never got overtime...y not this law needs to be changed...bunch of bs

  16. 16. Logan mahon [ September 03, 2017 @ 10:37AM ]

    Overtime pay I trucking is ridiculous I understand why otr is hard to nail down but for local hourly drivers there's no reason that we shouldn't be paid overtime pay just like almost everyone else that's hourly

  17. 17. Kason [ September 16, 2017 @ 10:36AM ]

    I'm in the same boat as well we only get paid overtime after 60 hours and they push us to about 59 hours every week it is so tiresome. Maybe somebody needs to get lawyers involved over labor issues this law was passed many many years ago

  18. 18. Kason [ September 16, 2017 @ 10:37AM ]

    I'm in the same boat as well work there for 20 plus years and we don't get overtime till after 60 hours one of our drivers actually took the time to see how much money they company owed him in overtime and it was $200,000

  19. 19. Luis [ October 16, 2017 @ 06:34AM ]

    I myself don't understand it ,I don't even have a CDL because are under weight and we are all told it's a DOT rule. But other Amore companies pay overtime and some of are other terminals.

  20. 20. HR Trucking [ January 10, 2018 @ 12:47PM ]

    I completely understand all of the professional truck drivers concerns. I work or a Logistics company and we do not pay OT either. This is due to the cost to move freight. Trucking Companies do not receive enough money to transport goods anymore. We used to pay OT and found that it was costing the company more money to pay the driver than they were actually making in profits, this is what caused my company to stop OT. Although, we do start out at a decent hourly rate of 20 an hour and up.I vote we up the cost of transporting goods and allow the trucking companies to pay the driver what they are deserved. Just my two cents.

 

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