Travel agencies faced with new overtime regulation: Travel Weekly

The final rule issued by the U.S. Department of Labor (DOL) will expand the number of employees eligible for overtime pay.

While ASTA anticipates legal challenges to the rule, which could delay its entry into force on July 1, there are steps travel agencies can take now to ensure compliance.

The Department of Labor rule raises the minimum salary for guaranteed overtime pay. This number currently stands at $35,568 and is set to rise to $43,888 on July 1st and to $58,656 on January 1st.

The first adjustment in July is based on the 20th percentile of weekly earnings of full-time wage earners in the lowest-wage census tract. Starting in January, adjustments are based on the 35th percentile. The Labor Code also includes a provision to update the thresholds every three years using current wage data.

ASTA General Counsel Peter LoBasso said small agencies would “bear the brunt” of the new regulations, as smaller agencies tend to offer lower starting salaries overall.

The new overtime rule is similar to the DOL rule Issued in 2016 “Under the Obama administration,” LoBasso said. The difference: The 2016 rule was based on the 40th percentile of wage earners, compared to the 35th percentile on which the 2024 rule is based. The 2016 rule was blocked by a federal judge.

LoBasso said the Trump administration was not supportive of this regulation, and it was dead at that point.

Given that the 2016 rule raised legal challenges, LoBasso believes the 2024 rule likely will raise legal challenges as well. If that happens, an injunction will likely be issued.

Meanwhile, Lobaso advised agencies to take steps to comply with the new regulations.

First, agency owners should review worker classifications, making sure salaried employees aren’t performing duties that make them eligible for overtime pay, he said.

“It’s very important to note that just because someone pays more than the minimum doesn’t mean you can treat that person as exempt,” he said.

Then owners must consider employee salaries. Those with employees close to the $43,888 threshold may want to give them a raise. LoBasso called it “the path of least resistance.”

But if an employee’s salary falls well below the new minimum, the owner may consider restructuring, LoBasso said.

“There are definitely ways you can tweak it creatively without it really impacting your bottom line,” he said.

For example, there are ways to indicate that some employees cannot work overtime. However, LoBasso noted that this could impact customer service. He said it was a matter of “balance.”

Agencies can also take this into account as long as they Meet the definition of a retail establishment and other criteria, they can claim exemption from overtime rules. ASTA had lobbied for the exemption for years, and received it in 2020.

“Basically, this means that regardless of someone’s job duties, and that means even if they don’t qualify for so-called white collar exemptions, if you’re paying that employee at least one and a half times the applicable minimum wage — which we read to mean State minimum wage, because many states have more than the federal minimum wage — plus more than 50% of total compensation that comes in the form of commissions — that person could be treated as exempt,” LoBasso said.

He called it a “very useful solution.”

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