December 5, 2016
In May of this year, the Department of Labor issued new rules that raise the salary threshold where overtime pay is required. The rule significantly increased which employees were eligible for overtime pay from those who earn $23,660 per year to those who earn $47,476. This increase meant that employees who were previously salaried were going to be switched to hourly and become eligible for overtime pay. The reality is that many companies, including small businesses, have to make many changes in order to accommodate the new rules. However, just days before the December 1st compliance deadline, a federal judge issued a temporary injunction on the law delaying implementation. To help clients, prospects and others understand the issue and its impact; Wilson Lewis has provided a summary of key points below.
Protest of New DOL Regulation
Many companies, especially those that employ lower-wage employees and service industries, such as hospitality and retail, have fought the DOL change. The additional administrative expenses alone, such as tracking hours for more employees and updating payroll systems, were estimated to cost businesses millions. In addition, for companies that can’t afford to raise wages to the level needed or lose work performed in overtime hours, some simply planned to reclassify workers as hourly instead of salaried. This would impact certain benefits in some cases, including flexibility and comp time.
To counter the new DOL rule, a United States District Court Judge recently granted a request by 21 states and several business groups to temporarily delay the Department of Labor’s Fair Labor Standards Act (FLSA) changes. This effectively means that, as before, only salaried workers earning less than $455 per week will be eligible for overtime pay until the case is litigated and the court determines whether the DOL had authority to make these changes.
So, What Now?
With the temporary injunction in place, employers have a few choices, depending on what has already been communicated – or not – to employees. If no announcements or changes have been made yet, employers could certainly hold tight to see if or when the case is resolved and if any alterations are made to the DOL’s rule before implementation. However, it’s important to be prepared if the law is enforced at a later date – especially if it is applied retroactively.
If salary or reclassification changes have already been implemented or announced for affected employees, it’s probably a bigger employee relations risk to renege on any decisions unless they impacted employees in a negative or unwelcome way. Again, the changes may in fact become law in the future, so reversing any changes should be balanced against that possibility.
Contact Us
This last minute delay has been somewhat surprising for many but it’s unclear what the final outcome will be. If you have questions about the DOL overtime rule, its impact on your company or next steps to take, Wilson Lewis can help. For additional information please call us at 770-476-1004, or click here to contact us. We look forward to speaking with you soon.