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Speaking of Overtime Rules ….

Written by Patricia Collins Friday, May 19 2017 11:59

Let’s check in with the January 2017 case filed in the United States District Court for the Eastern District of Texas challenging the Obama Administration’s proposed changes to overtime regulations.  Those regulations would have required employers to reclassify many employees considered exempt from overtime rules to non-exempt status, requiring the employer to now pay overtime to those employees. The rule was widely considered a boon to employees, but a burden for small businesses and nonprofits. 

Those rules would have required that in addition to meeting certain requirements with regard to an employee’s duties, the employee must also earn a minimum salary of $47,476 to qualify for “exempt” status.  The current rule requires that the employee earn a minimum salary of $23,660.  The dramatic increase in the salary requirement caused employers to reevaluate classifications and to generate new policies regarding overtime and work hours in advance of a December 1, 2016 deadline.

As previously discussed on this blog, on November 22, 2016, the Eastern District of Texas entered an injunction prohibiting enforcement of the new rules.  Many clients have asked me, dreading the answer, whether that injunction remains in place.  On December 1, 2016, the United States Department of Labor appealed the injunction order, and sought a stay of the Court’s order prohibiting enforcement.  The Court denied the stay, and the matter is now on appeal.  During the appeal, the Department of Labor cannot enforce the new rules.  The appeals court granted a request submitted by the Department of Justice to extend time to file appellate briefs while “incoming leadership personnel” considered the issues.  That brief is now due on June 30. 

The Trump Administration has three choices: defend the rule, withdraw the rule, or rewrite the rule.  Labor Secretary Alexander Acosta has telegraphed that a review of the rule was necessary, but that the salary increase was too dramatic.  However, the Department of Labor’s repeated requests for extensions to file a brief indicate that it is not necessarily an easy call.  For example, because the Eastern District’s order granting the injunction called into question the rulemaking authority of the Department of Labor, there may be good reason for the administration to challenge the court’s injunction order, even though it does not necessarily agree with the rule. 

The overtime rules will remain in limbo until at least June 30, 2017.  We will continue to monitor the situation.  In the meantime, employers are not required to change their overtime policies or the classifications of their employees. 
 

By Patricia Collins, Esquire
 

On May 2, 2017, the House passed the Working Families Flexibility Act.  The purpose of the Act is to give employees flexibility in how they choose to be paid for overtime: in wages or in compensatory time off.  The Act crystallizes a tension I see often in my representation of employers. 

 Presently, the Fair Labor Standards Act (“FLSA”) requires employers to pay nonexempt employees overtime compensation for work hours in excess of 40 in a workweek.  Employers cannot compensate employees for those overtime hours in compensatory time off (“comp time”).  Such a policy violates the FLSA, exposing the employer to liability for the unpaid overtime hours as well as penalties and attorney’s fees.

 The FLSA prohibition against payment in comp time is intended to protect employees from abusive overtime demands by employers.  The statutory obligation to pay additional wages for hours over forty in a workweek, so the argument goes, forces the employer to base the decision to require overtime hours on business and financial considerations.  The FLSA’s ban on comp time legislates a policy determination that offering comp time will not protect employees from abusive demands by employers.

 Republicans this week argued otherwise.  They argue that permitting employees to take comp time rather than payment for overtime work gives employees flexibility.    Democrats who opposed the bill countered that the Act’s provision allowing employers the final say does not adequately protect employees. 

 Practically, the Act sits at the tipping point of many competing considerations:  employers want to establish policies that comply with the law, protect the business, and benefit employees.  Employees want flexibility, but they also need to be paid for their work.  The reality is that banked comp time can be a liability for employers because there are jobs for which attendance is extremely important, and unscheduled or unpredictable time is off is sometimes expensive or interferes with the progress of work.  Further, employees might not be free to use that comp time in the manner they would like if it interferes with the employer’s business.  Most employers offer paid time off in a set amount, in order to create predictability as to an employee’s attendance.  While this proposed rule might create flexibility and reduce overtime costs, I do wonder whether it is really a savings in the long run. 

 It will be interesting to see how the Senate balances these concerns, and whether employers will create policies that allow comp time.  The bill now goes to the Senate – no word yet on whether they will vote on it. Stay tuned!

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