HR Connection: State Labor Department gets in rule-making act

Frank A. Cania

I was wrong. There, I said it!

If there is one thing my loyal readers (yes, family pets count) know about me, it’s that I’m not often surprised by the state and federal departments of labor when it comes to regulatory activities. So, for a rule change to catch me off guard is, well, astonishing to say the least. But I must admit, the New York State Department of Labor got me. Could it be because I’ve been so focused on the federal overtime rule changes effective Dec.1? No, I think it’s because I made the mistake of thinking the state would be satisfied with the new federal minimum salary threshold and walk away from the challenge.

Well, I was wrong … so I hope my wife skips this month’s article, or I’ll have to repeat, “I was wrong,” several times while she pretends she didn’t hear me.

No longer willing to sit idly by and watch its federal counterpart get all the attention for increasing the salary threshold for the white-collar exemptions, on Oct. 19 the state DOL published its proposed rule increasing the state’s minimum salary threshold for the executive and administrative exemptions in the New York State Register. Further, building on the framework established in setting regional minimum wage rates earlier this year, it’s complicated and creates additional compliance burdens for employers.

Under the current New York Wage Orders, the salary threshold for the executive and administrative exemption is $675 per week. This amount is 75 times the current minimum hourly wage of $9. Historically, multiplying the minimum hourly wage by 75 has been a simple, straightforward way to arrive at the state’s salary threshold.

However, the state DOL won’t allow the current threshold to quietly ride off into the sunset, with the federal rule taking its rightful place as the new minimum salary threshold throughout the land. Instead, the state DOL has proposed applying its standard formula to the complex, tiered minimum wage framework, resulting in the following web of salary thresholds for the executive and administrative exemptions:

New York City – Large employers of 11 or more employees:

• $825 per week on and after Dec. 31, 2016;
• $975 per week on and after Dec. 31, 2017;
• $1,125per week on and after Dec. 31, 2018;

New York City – Small employers of 10 or fewer employees:

• $787.50 per week on and after Dec. 31, 2016;
• $900 per week on and after Dec. 31, 2017;
• $1,012.50 per week on and after Dec. 31, 2018;
• $1,125.00 per week on and after Dec. 31, 2019;

Nassau, Suffolk, and Westchester counties:

• $750 per week on and after Dec. 31, 2016;
• $825 per week on and after Dec. 31, 2017;
• $900 per week on and after Dec. 31, 2018;
• $975 per week on and after Dec. 31, 2019;
• $1,050 per week on and after Dec. 31, 2020;
• $1,125 per week on and after Dec. 31, 2021;

Remainder of NY – outside New York City, Nassau, Suffolk, and Westchester counties

• $727.50 per week on and after Dec. 31, 2016;
• $780 per week on and after Dec. 31, 2017;
• $832 per week on and after Dec. 31, 2018;
• $885 per week on and after Dec. 31, 2019;
• $937 per week on and after Dec. 31, 2020.

How it affects employers

The state’s proposed multiple salary thresholds mean at least two important things for employers: The single salary threshold applicable to all New York employers will become a thing of the past at the end of 2017, and the minimum salary for the executive and administrative exemptions will exceed that of the professional exemption. That’s because the New York Wage Orders do not set a minimum salary for professional employees. As an example, let’s look at Ellie and Blake, two of 15 employees working in their employer’s New York City office at the end of 2017, and both paid a salary of $913 per week. Ellie is classified as exempt under executive exemption, and Blake under the professional exemption. At the beginning of December, the company’s HR manager informs the management team that, to maintain Ellie’s status based on the executive exemption under the New York Wage Orders, they will need to increase her salary to $975 per week by Dec. 31, 2017. When asked if it was also necessary to increase Blake’s salary, the HR manager explains that Blake’s salary meets the federal salary threshold. Because the state’s Wage Orders do not set a minimum salary for the professional exemption, no increase is necessary.

But, what about Becky, Ellie’s counterpart in the Rochester? Hired at the same time, Becky is also classified as exempt under the executive exemption, and paid a salary of $913 per week. Again, the HR manager explains that Becky’s salary meets the federal salary threshold. In this case, the state’s Wage Orders set the upstate salary threshold below the federal minimum for the executive and administrative exemptions, so no increase is necessary. At that point, the CEO walked out of the meeting shaking her head.

There is an opportunity for everyone to provide feedback on these proposed changes to the New York State Department of Labor during the public comment period, which continues through Dec. 3, 2016. However, although these proposals are not yet final, it’s all but a foregone conclusion that they will be finalized and incorporated into the Wage Orders on Dec. 31, 2016.

As if the new federal overtime rules weren’t challenging enough for New York employers, they now have a few more reasons to evaluate their exempt positions annually to ensure ongoing compliance with both state and federal overtime rules.

Frank A. Cania, M.S.Emp.L., SPHR, SHRM-SCP, is president of driven HR, a USA Payroll Company. Based in Pittsford, NY, driven HR provides human resource consulting services including HR audits, outsourced HR management, employee handbooks, and a variety of other services. Frank concentrates on  wage-and-hour, FMLA, ADA, Title VII and Form I-9 compliance, as well as workplace investigations. This article is brought to you by the Rochester affiliate of the National HR Association, a local professional HR organization focused on advancing the career development, planning, and leadership of HR professionals.