Overtime Rules in Limbo, Creating Uncertainty

Overtime Rules in Limbo, Creating Uncertainty

More than a year has passed since I’ve updated this blog. Employment developments have occurred in that time, naturally, but for various reasons I have been quiet. Now it appears that the pace of change will increase. Laws and regulations put into place during eight years of a Democratic administration are at risk. In addition, court vacancies will be filled by another party. Change is inevitable. So I’ll update this site more regularly from now on.
Even before Donald Trump’s swearing in, a big change occurred to President Obama’s new overtime regulations. The Department of Labor rolled out new definitions for jobs exempt from overtime pay. Most notably, the minimum salary for such exemption was nearly doubled. Following time for comment, training, and notice, the rule was announced to take effect on December 1, 2016. Just days before the change, however, a federal judge in Texas enjoined implementation of the new rules pending trial, in a case brought by 21 states against the Department of Labor. The injunction applies nationwide.
The new overtime rules significantly changed the economic breadth of the exemptions from overtime. Under the old rules, an employee who met the other requirements had to make at least $455 per week to be exempt from overtime. This amount had not changed in years. As inflation continued over the decades, that salary minimum was under the poverty level for a family of four. The new rules changed the weekly minimum to $913, or an annual salary of over $47,000.
The new rules would have made a large impact join the retail and fast food sectors. There, store managers qualify for exemption by managing a store, but often earned a modest salary, while being expected to work long hours, sometimes opening and closing the stores.
Now the rules are frozen by the injunction, which is on appeal to the Fifth Circuit Court of Appeals. But even if the circuit court were to overturn the injunction, or the Supreme Court steps in, the rules would likely have been changed back by the new Republican-controlled Congress, or new rulemaking by the new head of the Department of Labor. That department is unlikely to appeal to the Supreme Court if the injunction stands.
This state of uncertainty does not help employers. The announced change in exemptions required employers to decide whether to increase the salary threshold for workers it wished to keep as exempt, or to begin paying overtime to such employees. Not surprisingly, by the time the federal judge enjoined the rule change, most affected employers had come to terms with the changes. They trained their human resources professionals, analyzed their workforce, and either had increased salaries or reclassified workers. When the situation is clarified in the next few months, employers will find it difficult to slash the pay rates of its managers, or change hourly employees back to exempt after they became accustomed to overtime pay. Some employers may go to a two-tiered system of new hires with lower rates of pay, which eventually leads to morale problems. Sweeping changes backward is likely to create a source of distraction and discontent among employees.

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