If you have been paying attention to the over 500,000 articles and news items written on the impending Fair Labor Standards Act changes you know that those changes are scheduled to take place on December 1, 2016. Employers have been scrambling to determine which employees will have their classification changes. However, many of the more recent articles have offered hope to some of those employers that they may not have to make those changes.
For those of you that don’t know what I am talking about, the USDOL has implemented changes to the regulations regarding overtime payments. They have altered the minimum salary (which is entirely different from the minimum hourly wage) for current employees classified as exempt from overtime. Currently that salary level required is $23,660 per year. As of December 1st, someone will have to be paid $47,476 to qualify as an exempt employee. As you can imagine this will adversely affect small business, non-profits and the restaurant industries more than others. As a result of the outcry and this uneven effect there have been attempts to alter this course of events.
There are several legislative attempts to change the overtime regulations. The major one is the Congressional bill H.R. 6094 Regulatory Relief for Small Businesses, Schools, and Nonprofits Act. This bill seeks to delay the implementation date of these changes until June 1, 2017.
An additional bill is H.R. 4773 Protecting Workplace Advancement and Opportunity Act. This bill states that the Secretary does not have the authority to increase the salary threshold on an annual or other basis without conducting notice and comment rule making with respect to each change. This bill will cause the DOL rule to cease to have any effect.
There is also an attempt to make some appropriation changes that will defund the regulation.
Unfortunately, time is running short for these attempts. Even if the House and Senate agreed on a bill the President, who ordered the DOL to make these changes, will most likely veto any such bill. They would then have to override his veto and that would be highly unlikely.
Another route to challenge the overtime regulations is filing lawsuits to stop the changes. Two such lawsuits have been filed. The first was filed by 21 states arguing that the USDOL overstep its bounds and the new rules impinge on states’ rights. According to attorneys from the firm Reed Smith, LLP:
The plaintiffs argue that the increased minimum salary threshold disregards the requirement that an employee actually perform “white collar” duties in order to be exempt from overtime pay. They also challenge the automatic indexing mechanism, alleging that it increases the salary level every three years without regard for current economic conditions or the effect on resources, or the statutory language and legislative history suggesting no such mechanism was anticipated in the statute. Lastly, the states argue that Final Rule is unconstitutional because it ultimately requires states to pay overtime to state employees based on a threshold determined by an executive branch of the federal government.
An additional lawsuit has also been filed by the US Chamber of Commerce, joined by 50 other business organizations.
The success of these lawsuits will depend on timing, arguments and judges that hear the cases. I remember reading a quote that said a case being heard by a judge appointed by the current administration is unlikely to be successful.
What should you do
All employers should be proceeding with their plans to make the changes required by the Final Rule of regulations. If the legislation proves to be successful, or the courts cases are successful in delaying things then businesses may get a temporary reprieve.