Employers hoping for a reprieve from the new overtime rule going into effect Dec. 1 shouldn’t hold their breath.
The new federal rule that the Department of Labor finalized in May will extend overtime pay protections to more than 4 million workers.
While lawsuits have been filed to delay its implementation, experts believe businesses should move forward with preparing for the new regulations.
- Prepare before Dec. 1. “Essentially employers should proceed as if the Dec. 1 effective date is going to occur,” says Alfred B. Robinson Jr., an attorney in the Washington, D.C., office of Ogletree, Deakins, Nash, Smoak & Stewart and a former acting administrator of the Department of Labor’s Wage and Hour Division.
Twenty-one states (not including New York) and more than 50 business groups have filed lawsuits requesting a delay, notes Robinson. A hearing Nov. 16 in federal court in Texas will decide whether an injunction will be issued to block the new rule, he says.
The House has passed a bill delaying the rule, but President Barack Obama has said he would veto any legislative attempt to delay it.
- The new rule requires that managers or other salaried workers earning $47,475 or less per year be paid overtime. The cutoff has been $23,660 since 2004 ($35,100 in New York). For additional provisions, see nwsdy.li/OT.
Robinson thinks getting the rule delayed will be difficult: “The Fair Labor Standards Act provides broad discretion and authority to the Secretary of Labor to define and delimit those exemptions for executive, administrative, professional, outside sales and computer employees” (those effected by this rule).
The Department of Labor “is confident in the legality of all aspects of the overtime rule. Businesses should prepare for the final rule to go into effect on December 1,” DOL spokesman Jason Surbey said.
- Analyze staff. Many employers are “taking this seriously and conducting an analysis of their workforce,” says Brian Shenker, a labor and employment attorney at Portnoy, Messinger, Pearl & Associates, Syosset human resources consultants.
- Salary hike option. For the most part, when employees are a few thousand dollars away from the new threshold, employers are raising their salaries to meet the new threshold to still keep them exempt from overtime, Shenker notes.
Still, many small employers can’t afford to simply raise salaries, says Andrew Kimler, a partner at the Lake Success law firm of Vishnick McGovern Milizio. They may have to reclassify employees as non-exempt, or hourly employees, and track their hours by having them clock in and out.
“That could have an impact on morale, however,” notes Kimler, adding such employees aren’t used to clocking in and out.
- Keeping to 40 hours. Kimler thinks smaller firms will limit affected employees to a 40- hour workweek to avoid paying overtime.
Kimler advises companies to discuss with employees “the economic realities of the new regulations and what they have to do in order to comply with the law.”
- Automatic updates. The law also mandates the thresholds be automatically updated every three years, says Shenker.
“We’re concerned about automatic updating,” notes Nancy Hammer, senior government affairs policy counsel at the Alexandria, Virginia-based Society for Human Resource Management.
It will automatically happen “regardless of what’s going on in the economy or specific industries,” she says.
The society isn’t opposed to an increase in the salary threshold, but rather the size of it.
“I think there’s broad agreement that the existing threshold needed to be adjusted,” says Hammer. “The DOL could have done that at any time, but they waited more than 10 years, and now they are more than doubling it.”
Estimated cost to businesses to implement the new rule in the first year
Source: Alfred B. Robinson Jr.