Body shop owners should be prepared to re-evaluate how they pay some employees so that they can stay in compliance with new overtime rules.
In May, the Department of Labor announced changes to overtime pay regulations that may lead to autobody shops and mechanical repair shops re-classifying previously exempt employees.
The new rules, which take effect on Dec. 1, raise the minimum salary threshold from $23,660 ($455 per week) to $47, 476 ($913 per week) to qualify as exempt from overtime requirements. The highly compensated employee threshold is also being raised from $100,000 to $134,004.
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In addition, the salary threshold will be updated (and likely raised) every three years.
The duties test (which is uses the type of work the employee does to determine exemption) has also been tweaked so that bonuses and incentive payments can count toward as much as 10 percent of the new salary level.
“It works out so that you could pay them as low as $821.70 a week, and then over some longer period in the quarter you could have the person be given bonuses or commissions to make up the rest,” says Brian Farrington, an employment law attorney at Dallas-based Cowles & Thompson.
Farrington participated in a panel discussion on the new rules presented by the Automotive Service Association (ASA) on June 15. Darrell Amberson, president of operations at LaMettry’s Collision, and Ed Cushman, owner of C&H Foreign Auto Repair in Spokane, Wash., also participated.
The DOL expects the change will raise wages by an estimated $12 billion over ten years, and extend overtime protections to 4.2 million additional workers.
Shop owners will need to re-evaluate their exempt employees and either raise their pay to meet the new levels; pay them overtime; transition them to hourly pay; or realign work hours and staff workload.
After the new rules were announced, the Auto Care Association released a statement expressing disappointment in the decision to increase the salary threshold.