Thursday, September 22, 2016

Overtime Overheat

The challenges ahead….

Soon after the DOL announced that it would draft proposed new rules for the overtime requirements under the Fair Labor Standards Act (FLSA), we began to hear from various sources how detrimental the new salary threshold may be. Even members of Congress (both dems and reps) reacted negatively. It’s pretty telling when our elected representatives themselves say they will have difficulty with the new threshold.

Then we had the expected submission of legislation to counter those new rules. This is just one of the at least three bills since presented. See also H.R. 5813 and S. 233 / H.R. 465. These bills would defer the implementation date, phase in the increase in the salary threshold, or allow private employers to offer comp time in lieu of overtime, something that is not legal at the present time.

Now we have two lawsuits filed. One by 21 states, and the other by the US Chamber of Commerce and over 50 business groups, including the National Association of Manufacturers, the National Retail Federation, National Automobile Dealers Association, and the National Federation of Independent Business.

The suit filed by the states charges the Obama administration with overstepping its authority in rewriting the rules, and claims the change will place an undue burden on state budgets (see the complaints of members of Congress above!).

It also points out that the DOL’s focus on the salary threshold ignores the importance that the FLSA places on an employee’s duties stating that the emphasis on salary defies the statutory text. In addition, the automatic increase factor is in violation of federal law that requires that such regulations go through both notice and comment periods before implementation. Their argument is that each increase is considered a new rule and should go through the same process. In fact, the DOL’s position in 2004 (the last time the rules were updated) was that indexing is prohibited without specific Congressional authorization – more ammunition that the new rules are an overreach of authority.

The argument is further made that enforcing such a rule on the states (as employers themselves) infringes on state sovereignty.

As has been argued by business since day one, the states have said that the new threshold will substantially increase their employment costs and force them to cut services or lay off employees.

Many of the same arguments were made in the lawsuit filed by the business groups. In addition, it stated that the costs of compliance will force many smaller employers and non-profits (especially those that operate on fixed budgets) to cut critical programming, staffing, and services to the public. The ability to effectively and flexibly manage their workforces after losing the exemption for frontline executives, administrators and professionals will be lost and millions of employees across the country will have to be reclassified from salaried to hourly workers, resulting in restrictions on their work hours that will deny them flexibility and opportunities for advancement.

I previously described the legislation presented by the Protecting Workplace Advancement and Opportunity Act as veto bait. That’s likely still true, along with the tough road the filed lawsuits have ahead. However, all this points to the widespread discontent with the new regulations, the way they were formulated and the ignorance of the actual effects they will have on real-life businesses, and real-life employees.

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