Wednesday, November 23, 2016

With the new overtime rules DOA, what now for employers?

Yesterday I promised myself a blogging vacation until after the Thanksgiving holiday. And then Judge Amos L. Mazzant III dropped the biggest employment law story of the year by enjoining the DOL’s new overtime rules.

My 5th grade daughter just completed two long-term school projects—a comprehensive book report celebrating a Newbery Medal winner (she chose Shiloh), and a scientific study of a native Ohio bird (she chose the wild turkey). They were due within two days of each other, and she had several weeks to complete each. We sat down with her school planner and mapped out reasonable due dates for each piece of each project, so that she would not get slammed at the end. With her busy music schedule, this lesson in non-procrastination was vital to her completing the projects on time (which she did).

I hope she doesn’t read this post, because I don't want her ever to think procrastinators win. Nevertheless, employers who procrastinated in preparing for the new overtime rules are feeling pretty good right about now.

Let’s say you’ve been a diligent employer and have done everything to prepare for December 1. You’ve reviewed the exemption status of all of your employees. You’ve determined the group of currently exempt employees earning less than $913 per week. And, for those employees, you’ve determined which to keep at the same salary level (to be converted to salary non-exempt come December 1), which to convert to hourly non-exempt (including determining the proper hourly wage), and which to keep exempt by grossing up their salaries to the $913 level. You might have even implemented a fluctuating work week for your new class of salaried exempt employees to try to control overtime costs. And, because this ruling came so late, you’ve almost certainly communicated these changes to your employees.

What should you do now? 

For starters, you can do nothing and leave the changes in place. Nothing prevents you from paying any employee by the hour (no matter what they do for you), and paying them overtime. And, nothing prevents you from keeping a higher salary.

What if you want to undo what you’ve already done and keep the status quo intact. Again, there is no legal magic to this. The rule is dead, and you are under no legal obligation to follow it. Provided that you haven’t had employees sign contracts promising them a new salary, or otherwise made clear and unambiguous promises upon which your employees reasonably relied to their detriment, I suspect how your employees will feel about maintaining the status quo will depend on how they felt about impending change in the first place.

Consider the following emails The Evil HR Lady (aka, my friend Suzanne Lucas) received from an employee upset about an impending switch from salaried to hourly.
I was informed today that I would be going from salary to hourly. I know I am not supposed to look at this as a demotion but since only one of two of us is being switched, it is hard not to. The change is strictly about not having to pay me $483 more per month to take me to the new salary threshold. But as I said, I am a manager and my job duties definitely fall under the Exempt category - I supervise an entire department, I make decisions autonomously etc. I also answer texts and emails after hours and on weekends.
My daughter recently told me she had been demoted in anticipation of the new law changes under FLSA. She has a Masters Degree and works as a copywriter for a large non-profit. She was hired as an exempt employee. The company has consistently resisted her requests to be brought up to the industry standard median pay of between $45,000 to $55,000 per year. She was told that effective Dec. 1, 2016 she would be considered an hourly employee. There has been no change in her job responsibilities. She has consistently worked overtime hours since beginning her employment. For example, in two recent weeks she worked 156 total hours preparing for and managing a conference for her organization’s national and international constituency. She has never received overtime pay. My intuition and common sense tell me something is not quite right here.
There are no easy answers here. The DOL created this mess by announcing an overtime rule that more than doubled the salary threshold. Employers begrudgingly complied, and now are stuck figuring out whether to undo what they’ve done in preparation for this (now) unlawful rule. 

Suzanne Lucas reaches the following conclusion, which I wholeheartedly endorse: “If your employees welcomed the change, it might be worth it for the morale boost to keep it in place, but if, like so many people, they feel demoted and demeaned by it, take advantage of the injunction and keep these employees as exempt employees.” As far as pay raises already given or promised, I think you face an employee-relations nightmare if you roll them back or otherwise take them away (especially since most were small jumps to reach the $913 level), even though you likely are under no legal obligation to keep them in place.