Business groups will challenge the new rule that expands eligibility for overtime to millions of workers, but employers should act as if the regulation will go into effect as scheduled on Dec. 1.
There’s legislation pending in Congress to block the rule, and business groups are considering challenging the regulation in court. But the chances of blocking the rule before it goes into effect are slim.
Even many salaried employees will have to watch the clock under new overtime pay… more
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The rule would make any worker making less than $47,476 a year eligible for overtime if they work more than 40 hours a week, even if they are managers or professionals. That’s double the current overtime pay threshold.
Momentum is growing for legislation that would force the Department of Labor to withdraw the rule until it conducts more analysis on its impact. But even if this bill passes both the House and Senate, President Barack Obama would veto it.
Getting a veto-proof, two-thirds majority in Congress for this bill will be difficult, but the business community isn’t alone in objecting to this rule. Nonprofit organizations, universities, and state and local governments also are worried about the rule’s impact, so they’re lobbying Congress as well.
This coalition “is only going to grow,” said David French, senior vice president for government relations at the National Retail Federation.
There also could be lawsuits challenging the rule. Business groups could contend the new salary threshold is so high that it’s contrary to Congress’ intent of exempting people with management responsibilities from overtime pay requirements. Or they could contend the Department of Labor doesn’t have the authority to automatically increase the overtime pay threshold every three years without going through the regular rule-making process.
Both of these legal strategies are long shots, however, said Tammy McCutchen, a principal at Littler Mendelson who headed the Wage and Hour Division when the Department of Labor last increased the overtime threshold in 2004.
Employers need to proceed as if the rule will go into effect Dec. 1, she said.
That starts with analyzing how your exempt employees are paid, and identifying the ones who will become eligible for overtime pay in December under the new pay threshold.
Then you’ll have to compare the costs of raising their salary to $47,476 in order to avoid overtime, with the costs of reclassifying them as non-exempt employees and paying overtime if they work more than 40 hours a week.
You’ll also have to figure out to track the time that salaried employees spend on work. For those making less than $47,476, travel time to conferences, training and work at home all will be counted as paid time that has to be tracked, McCutchen noted.
You can reclassify salaried workers as hourly workers, but that’s tricky. Many employees will see having to punch a clock as a demotion.
“Employers can expect many employees to feel hurt and underappreciated,” saidAlice Kilborn, consultant on workplace litigation prevention in Albuquerque, N.M., in a Society for Human Resource Management blog on how to tell employees that they’re be reclassified as an hourly employees. “Many workers place a premium on the prestige of being considered an exempt or salaried employee — no matter how much we emphasize that it’s just a categorization of pay and not a reflection of importance or level of contribution.”
So you should begin to talking to employees now about what the new overtime rules will mean for them, SHRM recommends.