By: Jamie LaReau

Obama proposal would raise salary threshold

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Car dealers may have to pay more to employees who work more than 40 hours a week or tweak pay plans to avoid doing so.

White-collar workers such as managers are exempt from overtime pay if they make a salary-based compensation of more than $455 a week, or $23,660 a year.

But President Obama wants to change the overtime rules.

His proposal would more than double that salary floor to $970 a week, or $50,440 a year. Doing so would expand the number of workers eligible for overtime from about 8 percent of the salaried work force to about 40 percent, covering 5 million more workers in the first year of its implementation, according to the U.S. Department of Labor. The department explains the rationale behind the proposal on its website, at dol.gov/featured/overtime.

The salary threshold was last changed in 2004. If Obama’s proposal is adopted, the potential impact on dealers is murky, said Douglas Greenhaus, chief regulatory counsel for environment, health and safety with the National Automobile Dealers Association in McLean, Va.

“We’ll take a look at who at dealerships fall between those two numbers and how the pay plans might be impacted,” Greenhaus said. “Both the dealer and the employees may be impacted in a negative way.”

That’s because many dealership employees prefer that a certain percentage of their compensation be salary. The dealer might have to reduce that salary amount to achieve overtime exemption, he said.

“This would impact those who get the majority of their pay from salary,” Greenhaus said.

“It has nothing to do with the commission-based employee,” he said. “It has no effect on the salesman, parts man, F&I manager, or mechanic. They are exempt.”

Greenhaus said an employee must also meet white-collar definitions to be exempt from overtime pay. That means the employee must be a professional, such as a full-time accountant, or an executive, meaning the person directs a department such as a sales manager, he said. Or the employee must be in an administrative role, definitions of which vary widely, Greenhaus said.

If a dealer is unsure whether an employee qualifies, NADA advises to treat the employee as if he is eligible for overtime. NADA offers its members an online guide to fair labor standards to help clarify an employee’s status.

The comment period for Obama’s proposal ends Sept. 4. No hearing is yet scheduled, Greenhaus said.

“By that date, NADA will have analyzed the potential impact of the proposal on dealership employees. We’ll make suggestions, provide data and comment on anything we find objectionable,” said Greenhaus. “The important thing is to maintain as much as possible the flexibility for the employer and employee on how to compensate.”

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