ComplianceHR President, Lori Brown, and VP of Strategy, Tammy McCutchen, hosted a webinar today that took head-on the question of what businesses should take away from the election results as it effects the upcoming December 1st changes to Overtime.
Tammy brings a unique perspective on topics of regulation, litigation, and legislation, first and foremost as the former head of the Wage & Hour division of the Department of Labor during the Bush administration, secondarily, as a lawyer representing the U.S. Chamber of Commerce in the lawsuit challenging the new regulations currently before Judge Mazzant in Texas, and finally as an advising member of President-Elect Trump’s transition team.
Below are some of Tammy’s key takeaways which I believe will be helpful for those who have completed their job reviews, those who are in the throes of tackling this process, and perhaps most importantly, for anyone who might be considering holding off due to the election results:
In a quick review of the changes, Tammy highlighted a few key things people often overlook regarding the December 1st new rules. The most significant change is the doubling of the minimum salary level required for exemption from $455 per week to $913 per week. She encourages everyone to remember this is a weekly requirement even though it is often discussed in terms of annual salary level. Second, while there is a provision in place for 10% of the minimum salary level to be satisfied through discretionary bonuses, Tammy stresses that this should only be executed with a full-proof process as it is easy to get wrong. Lastly, Tammy highlighted the automatic increase scheduled for 2020 which is estimated to take the minimum salary level up to $51,000.
With that quick review done, Tammy then unpacked for us what we might expect from the incoming government.
With a quick snapshot of the Legislative environment, Tammy highlighted that not only will Republicans now control the White House, Senate and House of Representatives, President-Elect Trump will also be appointing a Supreme Court Justice as well as filling a total of 103 vacancies at the appellate and district court level.
While encouraged by the number of bills currently in front of Congress that would impact the new DOL rules (the four bills include the Protecting Workplace Advancement and Opportunity Act, the Overtime Reform and Enhancement Act, the Overtime Reform and Review Act and finally the Regulatory Relief for Small Businesses, Schools and Nonprofits Act), Tammy described the likelihood of these bills passing both the House and the Senate and surviving veto from President Obama as fairly futile.
As another option, there is a chance that Congress could adjourn before December 9th, opening the possibility of a nullification of the regulation through a resolution of disapproval. This needs to be done within 60 legislative days of the regulations being passed. It is important to appreciate however that one risk of adjourning early would be that President Obama would take that opportunity to make recess appointments including an appointment to the Supreme Court.
Tammy’s key takeaway regarding legislation: Timing is unlikely to be on our side with regards to the December 1st compliance deadline.
Turning to the pending lawsuits which have been consolidated in the Eastern District of Texas, this past Wednesday was the hearing before Judge Mazzant on the preliminary injunction motion. Tammy was present and described a long hearing during which the judge asked a number of tough questions. Of note, the Attorney General for Nevada pointed out that since President-Elect Trump has announced he will not take a salary from the federal government, his salary will be below the minimum threshold of $47,476 to be considered a bona fide executive! Judge Mazzant has said he will make a ruling on the injunction Tuesday of next week so we should all keep out eye out for that news.
Tammy’s key takeaway regarding current litigation: Stay tuned on Tuesday and Wednesday but remember this is just an injunction while the litigation continues.
Regulation under new Government:
Unless the preliminary injunction discussed above is granted, regulation will go into effect. Tammy is quick to highlight that because these rules will be both final and effective when President-Elect Trump takes office, the only way to walk them back would be to restart regulation. This is a minimum 90 day process but more often takes upwards of 18-months. Tammy highlights that we should not assume that Republicans in charge of the DOL will be any less likely to enforce FLSA regulations as the Democrats have been. Looking at her own track record, Tammy reminds us that Republican appointees will continue to focus on collecting back wages through enforcement of the regulations.
Tammy’s key takeaway regarding regulation: December 1st comes before Jan 20. Even if the injunction is issued, this could be overturned. You really do need to be prepared to comply despite the election.
As a wrap-up, Tammy focuses our attention on the employees here — remember that even if rules are rolled back, you want to take into account managing any employee backlash. Unhappy employees do complain to the DOL and they will sue. The potential cost to employers either in back wages or in settlement dollars can be very real and have potential to have a severe impact on companies of all sizes.
Tammy’s overall recommendation is to exercise judgement. Protect your company. Don’t toss compliance aside just because of this election, that could be a very costly mistake.
ComplianceHR’s Navigator suite has been used by over 3,000 registered users and over 1,000 companies to analyze the exempt status of employees in a quick, accurate, and cost effective way. Characterized as a mechanized version of Tammy’s review process, Navigator OT can help you uncover and fix any misclassifications before it is too late.