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Overtime rule in legal limbo causes ongoing confusion

FLSA overtime rule still being considered for revision

Employers across the country are anxiously awaiting clarification of the Fair Labor Standards Act (FLSA) overtime rule that would have dramatically expanded the number of white collar workers who qualify for overtime pay. Business trade groups strongly object to the proposed changes and are eager to avoid the possibility of increased labor costs and liability risk. As of May 2017, the rule remains in legal limbo.

“Many businesses have already reclassified employees to nonexempt status and/or increased salaries in anticipation of the change,” according to Michele Kauinui, Director of Human Resource Services at simplicityHR by ALTRES. “A temporary injunction at the 11th hour, along with the subsequent administration change, now puts everything in jeopardy.”

Newly confirmed labor secretary Alexander Acosta has indicated that he might still consider raising the threshold for overtime eligibility. However, the amount of the increase would probably be significantly less than the proposal by the previous administration. Acosta also mentioned the need to pay close attention to the “extreme economic impact” any increase would have.

The Department of Labor has until June 30, 2017 to determine if they will drop the appeal on the lawsuit challenging the overtime rule update and whether or not there should be any revisions to the overtime rule as it currently stands.

“It’s an understatement to say that there is widespread confusion about the law and its potential impact on business,” says Kauinui, who is closely following the issue. Business owners should remain patient and in the interim Kauinui recommends carefully considering three things before taking action: assess the impact of any salary changes on your business’ bottom line, identify the challenges that may arise in undoing previous changes, and weigh the effect undoing previous changes may have on company morale.

Overtime rule change dates

July 2017 The U.S. Department of Labor published a Request for Information (RFI), Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales and Computer Employees. The RFI is an opportunity for the public to provide information that will aid the Department in formulating a new proposal to revise these regulations. The comment period for all issues raised in the RFI ended on September 25, 2017.

November 2016 U.S. District Judge Amos Mazzant issued a nationwide preliminary injunction that blocks the U.S. Department of Labor’s new overtime rule, which was set to take effect on December 1, 2016. Many employers have already instituted wide-reaching operational changes in efforts to accommodate the new rules—changes that may have included an increase in salaries, shifting workers to hourly status, or even laying-off employees to meet cost constraints.

May 2016 The Department of Labor’s (DOL) Wage and Hour Division issued its long-awaited Final Rule regarding “white collar” exemptions under the Fair Labor Standards Act (FLSA). This rule would have doubled the annual salary threshold under which an employee can qualify for overtime and will go into effect on December 1, 2016.

June 2015 A proposal announced by President Obama seeks to dramatically raise the income threshold for overtime eligibility of employees covered by the Fair Labor Standards Act (FLSA). This has the potential to increase labor costs and the liability risk for many business owners. Business trade groups strongly object to the proposed changes, which do not require congressional approval and are likely to go into effect in 2016.

Compliance with the Fair Labor Standards Act

Currently under federal law, only employees making less than $23,660 annually might be entitled, by law, to time-and-a-half pay for hours exceeding 40 per week. Hawaii state law requires overtime pay for anyone who works over 40 hours a week. The intersection of Hawaii and federal law is a huge grey area that will continue to evolve.

In addition to the salary threshold, there are various types of duties tests that evaluate if the employee is overtime eligible, based on the type of work being done (manual versus intellectual, for example); these tests are also under consideration for revision. Also on the table are provisions to adjust the threshold automatically, going forward, though the methodology for how this is to be determined has not yet been decided. Visit the FLSA Advisor on the U.S. Department of Labor website to help you determine if you need to comply.

Have a question for one of our HR experts? To learn more about this issue or to schedule a free consultation on the advantages of human resources outsourcing, contact simplicityHR.

This article is for informational purposes only and does not constitute legal advice. Readers should first consult their attorney, accountant or adviser before acting upon any information in this article.

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