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July 26, 2016
Adopt new FLSA overtime rules before December deadline, former DOL official says

By Kate McGovern Torone, Editor

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Employers should make any necessary changes to employees’ exemptions before the workweek that includes December 1, according to a former administrator of the U.S. Department of Labor’s (DOL) Wage and Hour Division (WHD).

McCutchen speaking at SHRMNew Fair Labor Standards Act (FLSA) regulations have raised the salary threshold for the law’s >overtime exemptions to $913 per week, which amounts to $47,476 annually. The change takes effect December 1—a Thursday—and Tammy McCutchen says employers probably want to avoid reclassifying an employee as nonexempt in the middle of a workweek. Calculating overtime would be too complicated.

Instead, adopt the new status the week before the deadline, she told attendees at the Society for Human Resource Management’s (SHRM's) annual conference in Washington, D.C., last month. That’s the week of Thanksgiving and unless you’re in retail, employees are unlikely to work more than 40 hours that week anyway, McCutchen said.

Employers also should review all employee exemptions, not just those for workers falling between the old and new salary thresholds. Now is the time to get your house in order, McCutchen said; now is the time you can fix things with the lowest risk of employee complaints and litigation.

A creative solution

Employers have several options for controlling costs but what about morale?

In another SHRM session, Brenda S. Kasper, a partner at Kasper & Frank, LLP, said that employers may want to consider creating a “salaried nonexempt” category. While technically still nonexempt for FLSA purposes, employees may be more receptive to punching a clock if they know they still are guaranteed a salary.

Employers would still have to track hours and pay overtime, but it’s a way to make people happy, Kasper said. McCutchen said she expects a lot of employers to consider this option.

A SHRM official, however, told HR.BLR® that she thinks requiring employees to punch a clock will be the bigger morale issue. Lisa Horn, the organization’s director of congressional affairs, said that employers have reported that this requirement will be demoralizing; many exempt employees worked hard to achieve that “status,” she said. And Millennials will feel this change particularly hard, Horn noted. Working long hours was how entry-level employees proved themselves.

Employee morale also may suffer as companies revoke telecommuting privileges, Horn said. Employers are reluctant to allow nonexempt employees to work from home, she noted; there’s too much risk that they will perform work off the clock.

A chance for change?

Some stakeholders have vowed to fight DOL’s rule. Even members of Congress are considering various avenues: stand-alone legislation, a rider on the pending appropriations bill for DOL and even invocation of the Congressional Review Act.

McCutchen, however, said that the rule is here to stay (an opinion >echoed by current WHD administrator David Weil). Even attaching a rider to the spending bill isn’t going work, she said. While doing so would require President Obama to veto the entire appropriations bill to save his rule, “I think he’d do it,” McCutchen said. “The only chance at any relief from this is a President Trump administration.”

Horn, however, says SHRM remains optimistic. A bipartisan effort could slow the rule down, she said. Or maybe litigation initiated after the fact could stop the threshold’s automatic increase, which will update the weekly salary requirement every 3 years. The first increase, slated for 2020, is expected to put the threshold at more than $51,000. The increase is ripe for litigation because, according to Horn, it bypasses required notice and comment procedures.

A public uproar may be on the horizon, too. Horn said that most employees probably don’t know about these changes yet. These difficult conversations have to happen in July and August, she said, and “when that hits, maybe the noise elevates to another level.”

“Maybe there will be an outcry,” Horn said, “maybe we’ll have a groundswell.”

KateKate McGovern Tornone is an editor at BLR. She has almost 10 years’ experience covering a variety of employment law topics and currently writes for HR.ComplianceExpert.com and HR.BLR.com. Before coming to BLR, she served as editor of Thompson Information Services’ ADA and FLSA publications, co-authored the Guide to the ADA Amendments Act, and published several special reports. She graduated from The Catholic University of America in Washington, D.C., with a B.A. in media studies.

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