What a long strange trip it’s been. When it comes to the Department of Labor’s whiplash-inducing stance on overtime (OT) rules, perhaps the Grateful Dead said it best.
Since 2016, employers with hourly workers have been caught between two administrations with vastly different philosophies regarding the Fair Labor Standards Act.
Now, just when it appears that we’re nearing resolution, another election year approaches. Should the DOL’s proposed OT rules become law? And how likely is that to happen?
Where the Proposed Overtime Rules Stand
As you’ll recall, in 2016, the Obama Administration’s proposed OT threshold of $913 per week ($47,476 annually) was stayed in court, days before it was to take effect.
After several years of limbo, the Trump-led DOL issued its own proposal regarding the overtime salary threshold for non-exempt hourly workers. The new proposal raises the salary limit to $679 per week ($35,308 annually)—higher than the current $455 a week ($23,660 annually), but substantially lower than $913. The DOL received more than 200,000 comments during the open comment period, which ended May 21. Now we wait.
In addition, on March 29, the DOL made a second, related proposal, clarifying the definition of the “regular rate of pay”—the figure on which overtime is based. This proposal allows employers to exclude a number of perks from regular rate tallies: the cost of wellness programs, benefits, unused paid leave, reimbursed expenses, tuition, and discretionary bonuses.
While this proposal will lower overtime payments, it may encourage employers to offer hourly workers more benefits. The 60-day public comment period was recently extended until June 12.
If finalized, the new overtime rules are expected to make 1,000,000 more workers eligible for overtime pay, although earning less than envisioned under the Obama-backed plan. It may also result in pay increases for some hourly workers, should employers reclassify them rather than pay OT.
How Likely Will the Overtime Rules Become Law?
It’s anticipated that, should the new overtime rule become law, it will go into effect in early 2020 or perhaps late 2019.
However, legislation enacted in election years is frequently derailed, as we saw in 2016. Should President Trump lose reelection, the new administration may take office before the 2019 overtime rules go into effect and could reactivate litigation over the 2016 ruling. If the injunction is reversed, the higher salary threshold could be back in play.
Furthermore, the DOL’s current proposal may face legal challenges—on the one side from business associations opposing higher payroll costs and on the other from hourly workers’ advocates who feel the threshold is too low.
Attorneys General in 15 states have petitioned the DOL not to adopt the proposed overtime rule. But just last week, The Society for Human Resource Management (SHRM) announced support for the proposed overtime rules, with a few suggested changes.
One of those suggestions: give employers 120 days to implement the new overtime rules. Some worry that, in its haste to beat out the 2020 election, the DOL won’t give employers enough time to achieve compliance. That’s why employers should get ready now.
How to Prepare for Potential New Overtime Rules
Audit Your Employees
If you haven’t already, now is the time to identify which hourly workers could be impacted. Which nonexempt workers are earning more than $455 per week but less than $679, using the proposed regular rate of pay as well as the current standard? Which exempt employees are earning less than $679 a week—and would they qualify under the duties test for nonexempt status? How much could this potentially cost you in payroll?
Consider Reclassifying Affected Employees
Some employers are open to reclassifying employees to keep payroll down, but there are a number of factors to weigh. Formerly nonexempt workers may resent losing potential overtime earnings. Formerly exempt workers may also feel they’ve been demoted and resent punching a time clock. Morale may suffer. Furthermore, unless you’re careful, you may run into compliance issues or open the door to discrimination charges.
Make Sure You Can Track Hours Accurately
It will be more important than ever for employers with an hourly workforce to be able to track work time with accuracy. Every dollar counts. If your current time and labor software isn’t foolproof, now’s the time to find one that is.
Make Sure Your Scheduling Workers Wisely
In many cases, overtime pay can be curbed with strategic scheduling. Ensure your managers are following your policies and that your scheduling software is a help, not a hindrance. Keep those overtime hours down.
Find Out How EPAY’s TLM Can Help
Whatever overtime rules are put into place, our time and labor solution can help you achieve compliance as well as your business objectives. Our time clocks and other time-tracking methods accurately capture work time. Our scheduling software is designed to help curb unintentional OT. In fact, when it comes to overtime, our TLM system is so proactive, it can send managers text and email alerts before an hourly worker crosses the overtime threshold. Make the proactive choice and see for yourself.