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Tuesday, September 8, 2015

ABA Details Overtime Proposal’s Shortcomings

The Labor Department’s proposal redefining which employees are eligible for overtime eviscerates the longstanding “duties test” and fails to address the significant differences in wage rates and costs of living across the country, ABA said in an extensive comment letter.

“The proposal would transform the salary level from its historical role as a screening device into a far more substantive part of the exemption tests,” ABA wrote. As a result, the proposed high salary threshold would force many bank employees who easily satisfy the duties test to be reclassified as nonexempt.

In addition, the proposal’s failure to consider regional differences “will have dramatically differing impacts on [banking] — not based on whether a particular position should be eligible for overtime compensation — but solely as a result of the cost of living in a community,” ABA said.

Based on extensive input from member bankers, the detailed comment letter also stressed that exempt employees who are reclassified will likely view the change as a demotion and will be concerned by the loss of flexibility in how they spend and manage their time.

ABA, which also filed a letter as part of the Partnership for Workplace Opportunity coalition, further explained why the salary level should not be updated annually and why the proposed 40th percentile alternative for adjusting salary levels is flawed. It also urged the department to formally propose any changes it is contemplating to the duties tests and asked that employers have at least nine months to comply with the final overtime rule.

ABA thanked the many banks and state associations that provided input for ABA's letter and is encouraging those who filed their own to send a copy to their members of Congress.

Read ABA’s letter.

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