President Obama signs new overtime rule into effect. Photo: Department of Labor
The Obama Administration this week published a final rule updating Department of Labor (DOL) overtime regulations that will impact more than four million Americans—including many travel professionals—in its first year. The effective date of the final rule is Dec. 1, 2016.
Under the new rules, anyone earning less than $50,440 per year is subject to overtime pay, up from the $23,660 threshold that has been in place since 2004.
The American Society of Travel Agents has been concerned that by more than doubling the full-year salary threshold the bill will increase the cost of labor for travel agencies. ASTA estimates that the typical travel-agency employee earns approximately $38,000 annually.
“While we believe employees should be compensated fairly, in the public comments we filed last September we expressed our grave concerns that an increase of this magnitude with little lead time will cause significant disruption to our members' business operations and the travel agency community as a whole, which will be felt ultimately by the traveling public,” said ASTA president and CEO Zane Kerby.
The salary and compensation levels will automatically update every three years, DOL ruled, to maintain the levels at a certain national salary percentile. Future automatic updates to those thresholds will occur every three years, beginning on Jan. 1, 2020.
DOL claimed that the annualized equivalent of the previous standard salary level is below the 2015 poverty threshold for a family of four. It said that the new salary level is at the 40th percentile of “weekly earnings of full-time salaried workers in the lowest wage Census Region (currently the South).”
Kerby said this provision, “as well as the lack of accounting for cost-of-living variations in different parts of the country, represents an additional burden on all small businesses that we believe, frankly, the Obama Administration has failed to adequately consider.”
The Retail and Services Establishment exemption would normally protect agencies from these overtime rules. It says that an employee must work at a retail establishment, be paid at least one-and-a-half times the minimum wage, and be paid 50% percent or more by commission to be eligible for overtime, But unfortunately, more than 45 years ago, the DOL placed travel agents on a blacklist that prohibits them from falling under the exemption, because Labor determined that travel agencies “lack a retail concept.”
A few weeks ago, ASTA was considering filing a formal petition to have agencies removed from the blacklist. If ASTA cannot convince DOL to remove travel agents from the blacklist, it might be willing to accept a phased-in increase.
At the same time that it tries to work with DOL, ASTA said it will assist its members in complying with the rule in advance of the Dec. 1 effective date. ASTA will be launching a series of webinars and other educational programs on the subject, “and will be discussing it at our upcoming Global Convention,” Kerby said.
The first webinar will be held July 27.