(Post by Rick Dacri, November 28, 2016)
Time to take a deep breadth.
By now you know that a federal judge in Texas has put on hold the implementation of the changes to the Fair Labor Standards Act. The law, with a scheduled December 1 effective date, would have increased the salary level to qualify for overtime, virtually doubling the existing rate to $913 per week.
The overtime rate (“means test”) needed adjusting, but the Department of Labor’s proposal was excessive, so a hold is a good thing, albeit a bit last-minute. If Labor had asked me (they didn’t) I would have suggested a modest adjustment, along with a closer look at modifying the “duties test,” which many employers do not fully understand. It was the biggest area of misunderstanding from employers who called into my HR HelpLine.
Now that the law is on hold, what should employers do? Unfortunately, since the enforcement was enjoined at the last minute, most employers have either put the changes in place or at least announced the changes. And, Labor is likely to appeal the ruling, so an implementation of the law may still happen. So, here is what I suggest:
- If in the course of your review you found positions that did not meet the duties test, implement those changes.
- If you have not put in place compensation changes based on the new means test (raised salaries to meet the threshold and/or reclassified positions), you may want to put these on hold until we get clarity on Labor’s next move. Keep in mind, if you announced the changes, you will need to address the employee’s potential expectations.
- If you implemented salary changes and reclassified employees, it would be hard to pull these back. Besides it being an employee relations nightmare to do so and because you could still be in violation of some state laws, if the law is finally implemented, it could requires restoring them again.
- Communicate your plans to your employees. They may not know that the law is on hold and clearly do not know your plans. Be open and frank.
Employers have been put into a box with these actions. Consider what I have suggested above and put together your new plan. You may also want to seek professional legal guidance before you take any action.