VOL. 131 | NO. 238 | Wednesday, November 30, 2016
New Overtime Wage Rules Could Face Long Delay
BY MICHAEL WADDELL, Special to The Daily News
Just as employers were scrambling to comply with new U.S. Department of Labor (USDOL) overtime wage regulations that were set to go into effect on Dec. 1, a federal court in Texas last week blocked its implementation.
The U.S. District Court in the Eastern District of Texas granted a nationwide preliminary injunction, preventing USDOL from implementing the changes while the regulation’s legality is examined in more detail by the court.
The ruling came as a surprise to many.
“It’s probably created a few more problems than it did solutions,” said Rob Ratton, an attorney with Fisher Phillips in Memphis who had been working with clients for the past six months to prepare for the new regulations. “The Department of Labor is certainly going to appeal it to whatever venue they can find as soon as possible. There’s no clear path ahead.”
Ratton thinks potential litigation could take one to five years, since 21 states sued the agency to block the rule before it took effect. USDOL could also try to file an interlocutory appeal to bring it in front of the Court of Appeals quicker and potentially have a decision in six months.
From an employee relations perspective, companies are now in an uncomfortable position.
“The salary threshold is going to go up again at some point, so if you have worked out a system you are happy with, you should probably just stay the course,” Ratton said. “In general, we’re saying that if you’ve already communicated it to your employees, and unless it’s costing you an absurd amount of money, it might be easier from the perspective of certainty and employee morale to keep it in effect.”
The proposed changes would have expanded the number of employees eligible for overtime pay by more than doubling the salary threshold that determines coverage. Under the new revisions, salaried employees earning less than $47,476 annually ($913 per week) would be entitled to time-and-a-half pay for work that exceeds 40 hours per week. Currently the salary cutoff for overtime pay is $23,660 ($455 per week).
The revisions to the Fair Labor Standards Act (FLSA) were approved in May and were expected to disqualify up to 10 million U.S. employees from their current exempt status before the end of this year.
One new exemption that will take effect on Dec. 1 is raising the executive salary exemption level to from $100,000 to $130,000.
On the possibility that the Trump administration will immediately do what it can to reverse or suspend the new overtime wage regulations, to do so would take at least a year.
“It’s not clear to me how high a priority labor employment and issues are to the incoming President-elect,” said Paul Prather, attorney and shareholder with Littler Mendelson’s Memphis office. “It may be greatly influenced by the people he picks for Secretary of Labor and other positions within the Department of Labor and how his working relationship moves forward with Congress.”
The injunction could give Trump’s administration time to work to rescind the legislation.
“Now he could have that cover for a year and a half, so it could get taken away without ever taking effect, which is a little bizarre,” said Ratton.
One area of workplace law expected to be impacted by the incoming Trump administration is the Occupational Safety and Health Administration (OSHA), which increased its penalties immensely during the Obama administration.
“I think the President-elect did make some comments that would lead me to expect that he wants to roll back some of the administrative burden in terms of reporting and other aspects under OSHA, and probably refocus the safety and health administration on some of the more serious safety aspects of the workplace,” said Prather, who points out that those changes will take time to work through the political system.
Executive orders from President Obama that Trump could overturn immediately include Deferred Action for Childhood Arrivals (DACA) that involve work visas for people brought to the country young and not documented properly.
“It’s a substantial number of people who would lose the ability to work,” Ratton said. “There’s also some talk that he will raise the salary cap for H-1B professional visas, which would limit considerably the number of people who could come in on those visas.”
Trump has passively endorsed paid maternity leave and is expected to support pay equity, according to Littler Mendelson’s Post-Election report. To promote pay equity, the Trump administration is not likely to view favorably the EEOC’s revised EEO-1 reporting requirements, which will obligate employers to disclose pay data information. This change takes effect with the 2017 EEO1 reports, due March 2018, and applies to private employers with 100 or more employees.
“Looking forward, Trump has not provided a great deal of information about what he would like to do with the Department of Labor, but strangely enough he has come forward in favor of increasing the minimum wage,” said Ratton. “It’s certainly not what you would expect and not the traditional GOP platform.”
The FSLA does not preempt state laws, and in this past election three states approved new minimum wages over and above the federal wage.
“I think we’re going to continue to see that pattern with states and localities adopting minimum wages above the federal minimum wage,” said Prather, who sees much more interest and engagement overall today from businesses looking to understand the politics and mechanics of making laws and regulations and what they can do to influence them.
Prather believes that, in general, businesses will find the Trump years will offer a friendlier environment than under the Obama administration.