By Lisa Nagele-Piazza, J.D., SHRM-SCP
October 29, 2019 - SHRM
Michigan Gov. Gretchen Whitmer wants to raise the state's exempt salary threshold higher than the new federal rate of $35,568, which takes effect Jan. 1, but the rulemaking process may take a while.
Under the federal Fair Labor Standards Act's (FLSA's) "white-collar" exemptions, workers who earn at least a specified salary and meet certain duties test don't have to be paid overtime premiums. Workers who earn less than the salary threshold must be paid 1 1/2 times their regular rate of pay for hours worked beyond 40 in a week.
Whitmer said that less than 1 in 6 Michiganders will benefit from the new federal cutoff, and she directed the Michigan Department of Labor and Economic Opportunity to start the formal rulemaking process to raise the state threshold.
"President Obama took the first step towards restoring this right for millions of Americans five years ago, and if his proposed rule had taken effect, workers earning up to $51,000 today would be eligible for overtime pay," she said.
No Details Yet
Whitmer didn't propose a specific salary cutoff; rather, she directed the state labor department to figure out the appropriate level. Whitmer's office estimated that 200,000 more Michigan workers would have been eligible for overtime pay under the Obama administration's blocked rule than the current administration's recently finalized rule. Whitmer said the level set by President Donald Trump's administration "isn't good enough." The state labor department will begin the rulemaking process and could take up to a year to finalize a rule. The department will develop a draft proposal and hold hearings with employers and employees to determine a new salary cutoff.
(HuffPost)
Chamber of Commerce Opposes Rule
The Michigan Chamber of Commerce plans to oppose the potential rule. Chamber leaders said raising the exempt salary threshold could hurt the economy and workers. "It is unclear if [Whitmer] has statutory authority to unilaterally impose this type of very expensive and highly counterproductive state overtime mandate on Michigan's job providers," Michigan Chamber of Commerce President and CEO Rich Studley tweeted.
Employers Must Review State Overtime Exemption Rules
In addition to Michigan, several more states are considering increases to their exempt salary threshold. Other states, such as California and New York, have already implemented higher rates. Some states may have different duties tests as well as salary cutoffs, and it is important to understand and comply with the more stringent of the applicable rules, noted Alfred Robinson Jr., an attorney with Ogletree Deakins in Washington, D.C.
New Federal Standard
Exempt employees who are not covered by a higher state rate will need to earn at least the new federal cutoff of $684 a week ($35,568 annualized) in the new year. The current rate of $455 a week ($23,660 annualized) has been the same since 2004. The new rule is expected to prompt employers to reclassify more than a million currently exempt workers to nonexempt status and raise pay for others above the new threshold. Employers should immediately pull data for exempt workers earning below the threshold and weigh the cost of raising employee salaries above the new threshold against the cost of reclassifying employees as nonexempt and paying overtime, employment attorneys said.
Timeline: Overtime Rule History
The regulation governing how employers must pay certain employees who work more than 40 hours a week has a long history. Follow the twists and turns here.
Quiz: How Well Do You Know FLSA Overtime Exemption Rules?
Some employees can be exempt from the FLSA overtime requirements depending on their job duties and salary. Understanding the rules for exempt and nonexempt classification is critical for HR professionals.