Doesn’t it sometimes seem that courts and governmental agencies have a vendetta against holidays, and repeatedly go out of their way to make sure that no one in HR gets the opportunity to enjoy peaceful downtime with family?
Well, in keeping with that sentiment, shortly before Thanksgiving, a Federal District Court in Texas issued a nationwide injunction against the wage and hour regulations that were supposed to go into effect on December 1st. These were the regulations that more than doubled the amount of salary employers have to pay employees in order for them to be considered exempt from overtime.
In the short-term, the injunction means that the regulations won’t go into effect on December 1st, and, thus, that employers — most of whom have been very busily trying to figure out how to comply with the regulations — don’t have to make any changes to their exempt employee practices for the time being.
While there’s a chance that the government could file an emergency appeal seeking to overturn the injunction, it seems likely that the conservative 5th Circuit Court of Appeals would uphold the injunction, which means that a new compliance date won’t be coming up any time soon (if ever). And even if the regulations do go into effect at some point in the future, they won’t be retroactive, so immediate compliance is no longer necessary.
This is a much harder question to answer, since many employers have already communicated and started implementing changes.
As a result, the answer isn’t a legal one, since you can choose to ignore the regulations for now. Instead, you will have to weigh the advantages and burdens of continuing to move forward with your planned compliance efforts, against the advantages and burdens of not doing so. With that in mind, let’s explore the pros and cons of each option.
In deciding what you’re going to do, there are a number of factors you will want to evaluate, including: budget implications, implementation considerations and employee morale.
Let’s start by exploring the reasons why you might want to halt your compliance efforts and go back to the way things used to be.
Curtailment of future pay increases. Alternatively, increasing an employee’s salary to meet the new threshold can have a short-term positive effect, but if it maxes out your budget, or results in the employee moving to the top of the position’s paygrade, then it can have a longer-term demoralizing effect if you are unable to offer raises in connection with performance evaluations the future.
Even if you don’t have to comply with the regulations starting on December 1st, there may be compelling reasons to consider moving forward with the plans you’ve already put in place. Let’s revisit the same factors we used in the last section.
Perception of exploitation. The regulations were drafted to address the perception that some exempt employees were being exploited by being forced to work long hours for comparatively low rates of pay and no opportunity for overtime. Some of your employees may feel the same way, and taking away increased pay or opportunities for overtime can reinforce and sharpen those perceptions.
Regardless of which direction you choose to go in, you may have a separate compliance concern to deal with. In preparation for the implementation of the new regulations, you may have discovered you had some employees that were never properly classified as exempt in the first place, since the primary duties of their positions didn’t actually fall within one of the recognized exemption categories (quite apart from how and what they were being paid).
That’s a big deal, since correcting those misclassifications technically requires you to not only fix things going forward, but to look back over the past two (and sometimes three) years to determine any weeks in which overtime was likely to have been worked, and then to pay retroactive overtime for those weeks. Such an effort is made more difficult by the fact that you usually don’t track the hours that exempt employees work, and thus don’t have any data (other than an employee’s recollection) to guide your decisions.
To compound matters, the obligation to pay retroactive overtime extends not only to current employees, but also to any former employees who were similarly misclassified during their employment.
As you can imagine, many employers would prefer to avoid assessing and paying retroactive overtime, and, instead, would like to just fix things going forward. While there is no legally sound way to do that, many employers have historically chosen to roll the dice, and hope that their reclassified employees don’t start to wonder about back-pay once they learn that they’ll be entitled to overtime going forward.
With that goal in mind, employers taking such an approach have tried to come up with a plausible explanation to provide to reclassified employees as to what has fundamentally changed that only impacts the future, and not the past. The new regulations potentially provided just such an opportunity, since employers could blame them for the need to reclassify the position (even though the new regulations didn’t actually change anything about the primary duties test).
But now that the regulations have been put on hold, employers no longer have a convenient, built-in excuse to explain why they are changing someone’s status. As a result, any employers who were thinking about only fixing things going forward should seriously reconsider a more comprehensive solution.
With the future of the regulations up in the air, compliance is off the table for the time being. However, you still have a number of decisions to make, since putting your compliance plans on hold may or may not be the best decision for your workplace. If you’re a Hotline client, and you’re unsure what to do, or have questions you want to discuss in more detail, we’d be glad to help. Feel free to contact us.
James provides guidance to employers on a variety of topics with a focus on employment, risk management and liability issues. In addition to working directly with employers, he regularly conducts in-depth training through webinars, at client sites, and through the University of Minnesota’s Continuin
James provides guidance to employers on a variety of topics with a focus on employment, risk management and liability issues. In addition to working directly with employers, he regularly conducts in-depth training through webinars, at client sites, and through the University of Minnesota’s Continuing Ed program. He previously was a plaintiff’s attorney and brings that perspective into his advice to employers. James received his law degree from the University of Minnesota and his BA from Washington University in St. Louis.
On May 11, 2014, the governor of Minnesota signed the Women’s Economic Security Act (WESA), a bill that will require Minnesota employers to make dramatic changes to their employment policies and practices.
While WESA directly impacts employers who conduct business in Minnesota, the changes follow plans by federal and local governments to expand legal protections for women and other employees. For this reason, employers in other jurisdictions should pay close attention to these national and state law trends.
“The only thing that is constant is change.”
Turns out that dusty old Greek philosophers occasionally say profound things (Heraclitus also said that a man’s character is his destiny). And since the Greeks are considered the fathers of democracy and were responsible for no small number of laws themselves, it seems an appropriate departure point to talk about the constantly changing landscape of employment laws.
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