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Federal Overtime Rule Changes May Affect Oregon Employers

Yesterday it was reported that President Obama intends to expand the number of employees eligible for overtime. Today, he is directing Tom Perez, his Labor Secretary, to propose new regulations raising the threshold for overtime protections. How will that affect your business?

Long time LegalBrief readers may remember that in 2004, when President Bush overhauled overtime regulations, making it easier to designate employees as exempt from overtime requirements, LegalBriefs reported the new rules would have little impact on Oregon employers. That was because Oregon’s Administrative Rules were based on the old federal regulations and the Oregon rules did not change. Since conflicts between federal and Oregon regulations are resolved in favor of the employee, Oregon employers were required to follow the tougher Oregon rules, not the updated federal rules.

LegalBriefs, however, reported on one change that affected Oregon employers. The 2004 Bush regulations imposed a minimum compensation threshold that had to be met, in addition to the standard employee job function classifications. This minimum compensation was substantially more than the Oregon threshold at the time. Accordingly, LegalBriefs advised that since the federal threshold was higher than the Oregon minimum, the federal threshold applied.

It appears that it is this minimum compensation requirement that the President proposes to increase. How high will it be raised? We do not know. Will the new federal regulation be higher than the current Oregon requirement? We do not yet know for sure but probably so. Will Oregon follow the President's lead and raise the Oregon compensation requirement even higher? Surely some will try.

Two impacts from this federal rule making seem certain for Oregon employers.


1) Overtime Pay for Salaried Employees. Some, possibly many, jobs currently classified as salaried positions (exempt from overtime), will no longer be exempt. Before the new regulations become final, you will want to review all of your salaried positions to determine if you are complying with the new regulations.

If some of your positions are no longer exempt from overtime because the salaries are less than the new federal threshold, you have several options.

A)  You can give the employees in these positions a raise equal to or greater than the new federal minimum.

B) You can hire more employees to do the work currently performed by your existing employees (this is what liberal commentators predict you will do).

C) You can restructure your jobs so that they are more efficient or use technology to reduce tasks performed by your current employees (conservative commentators are afraid that many businesses will choose this path and reduce rather than increase the number of employees they hire).

D) You can require salaried employees that are no longer exempt from overtime to keep track of their hours and pay them for overtime at 1.5 times their regular hourly rate.


It remains to be seen how substantial the rule change may be and the actual impacts on businesses and the people they employ. Will more employees be hired as some suggest? Will restructuring result in fewer workers hired as others fear or will this turn out to be a lot to do about nothing? It all remains to be seen. There is, however, a much greater risk for Oregon employers.


2) Increased Wage & Hour Compliance Scrutiny. The political posturing and the new federal rule making will bring even greater attention to wage and hour issues. Already, this is the single largest area of employee lawsuits. Thanks to class action litigation, more damages are now awarded against employers in wage and hour cases than any other cause of action, even greater than all of the money awarded in discrimination cases.

With this increased attention, Plaintiffs’ attorneys will be looking for clients they can represent and some of your employees will scrutinize your practices.

The result will be more lawsuits, more claims against businesses and more money paid out in settlements and legal judgments. From the never ending waves of court decisions and my own experience with Oregon employers, most, if not all employers continue to have problems complying with the multitude of rigid, sometimes counter-intuitive wage and hour requirements.


You should be planning now for how you will comply with the new rules once they are adopted. Hire more employees? Restructure jobs? Pay overtime? Will you pass these costs on to your customers? You should also ask whether your practices could withstand increased wage and hour scrutiny. If the answer is “no” or “I don’t know,” now is the time to update your policies and practices and deal with any problems from the past (this may not be as difficult as you may think).

You should follow the President’s overtime regulation change closely and prevent employee claims by making necessary changes.

Alan Thayer


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LegalBriefs are published as an educational service for business people by Oregon business attorney Alan Thayer. He welcomes your questions and comments.

This article and all LegalBriefs articles are offered for general information and educational purposes only. They are not offered as legal advice and do not constitute legal advice or opinion. We do not promise or guarantee that the information is correct, complete or up-to-date. You should not act or rely upon the information in this or any other LegalBriefs article without seeking the advice of an attorney.

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