New Overtime Rules May Spell Trouble For Some Corporate PACs
Friday, May 20, 2016
New Overtime Rules May Spell Trouble For Some Corporate PACs

The Obama Administration’s publication yesterday of a regulation increasing the universe of employees entitled to overtime pay might reduce the number of employees from whom corporate PACs can seek contributions.

The new regulations, which take effect on December 1, 2016, increase the salary level below which certain employees are entitled to overtime pay. Currently, salaried employees are not entitled to overtime pay if they perform certain duties and are paid at least $455 per week (the equivalent of $23,600). Under the new regulations, the duties test would remain the same but the salary threshold would increase to $913 per week, $47,476 annually, adjusted every three years for inflation.

As we described when the regulations were first proposed last year, the increase in the salary threshold should not require companies to stop asking the newly overtime-eligible employees for PAC contributions. When evaluating whether an individual falls within the “restricted class” of employees who may be solicited for PAC contributions, FEC regulations require companies to look at the individual’s job duties, not the compensation amount. And the new regulations do not change this “duties test.”

But even though the rules will not reduce corporate restricted classes as a matter of law, corporate decisions to change compensation structures in response to the rule might effectively shrink the “restricted class.” Federal law provides that corporate PACs generally may only solicit PAC contributions from employees if, among other things, the employees are salaried. If companies respond to the rule by paying the newly overtime-entitled employees on an hourly basis rather than on salary, those hourly employees will need to fall off the restricted class lists even if their job duties would have otherwise placed them in the restricted class.

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