Introduction:

On May 17, 2016 the U.S. Department of Labor announced changes to overtime compensation for full-time/salaried workers across the U.S. This impacts advertising agencies due both to their unique workforce composition as well as the salary levels affected by the changes.

What It Means:

The new rule, “Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales and Computer Employees,” increases the current salary level subject to overtime (OT) pay from the previous threshold of $23,660 per year to a new threshold of $47,760.00 per year. Full-time/exempt employees within these classes and pay ranges will become newly eligible for OT pay.

The new regulation will put an enormous compliance burden on ad agencies within a narrow period of time (less than a year) as HR managers scramble to convert employees to hourly tracking schedules.

What the 4A’s Is Doing:

4A’s has worked proactively, from the moment the draft rule was proposed in 2015, to improve key provisions that would have otherwise adverse affects—on both agencies and their employees.

• In 2015, 4A’s joined a cross-industry coalition, The Partnership to Protect Workplace Opportunity. PPWO is comprised of over 50 organizations across a diverse array of industries and is led by the Society for Human Resources Management (SHRM), the largest HR organization in the world.

• Early in the “public comment” process, the 4A’s submitted a counter-proposal to the Labor Department. This sets forth a number of alternative approaches that include: (1) establishing a more reasonable salary threshold of $35,490 per year; (2) allowing pro-rata adjustment for part-time workers as well as the inclusion of bonus pay in a “total compensation” calculation; and, (3) phasing in the new regulation over the course of several years or months rather than the customary 60–90 days for a new regulation.

Is It Working?

Thanks to these efforts—and continued lobbying (below)—the final OT pay rule is more manageable for agencies to implement in a number of respects:

• The new salary threshold for overtime pay has lowered, slightly, to $47,476.00 per year. The threshold proposed under the original draft rule was $50,440.00 per year.

• Effective date of enforcement is Thursday, December 1, 2016. A six-month window to prepare for compliance is a vast improvement over the customary 60–90 day turnaround that was contemplated under the draft rule.

• Up to 10 percent of the new OT obligation can be met using bonus, commissions and other incentive compensation. Rather than having to work strictly with base pay, agency hiring managers can now use additional means of compensation to form a “total calculation” that meets the new requirement.

• The salary threshold will automatically adjust on a three-year cycle beginning in 2020.   Agencies can plan a salary increase to occur every three years (rather than annually). The Labor Department intends to calculate the amount of the salary based upon the national inflation and wage growth rates as recorded at the end of the second fiscal quarter preceding the scheduled change. For example, April 2019 rates for a January 2020 increase.

We’re Continuing to Work for You

Despite these improvements, the 4A’s Washington team continues to lobby members of Congress who oversee labor department funding and policy. These include members of the House Appropriations Committee, the House Education and Workforce Committee, the Senate Committee for Health Education Labor and Pensions and the various sub-committees.

• 4A’s and our coalition partners support the “Protecting Workplace Opportunity Act,” (PWOA) a bill co- introduced by Senators Lamar Alexander (R-TN) and Tim Scott (R-NC) and by Representatives John Kline (R-MN-2) and Tim Walberg (R-MI-57). This bill requires that a thorough ROI analysis be completed by the Labor Department prior to enforcing the new rule this December.

• 4A’s members can take direction action on this important issue by visiting the PPWO Action Portal. Simply enter your street address and an opposition letter will be sent on your behalf to your member of Congress.

More Information:

Read more about 4A’s advocacy on the new Federal OT Pay Rule:

“Expect Disruption With New Overtime Rules” (MediaLife, May 24, 2016)

“How The 4A’s Is Tackling the Overtime Pay Issue in Washington” (Campaign US, March 31, 2016)

“The Big Payback—Agencies Brace for Obama’s New Overtime Rules” (Campaign US, March 28, 2016)