Just before Thanksgiving, a federal judge dealt a potentially fatal blow to the new overtime rule that employers have been preparing months for. Judge Amos Mazzant decided that the Department of Labor did not have the authority to implement the rule that it had set to go into effect on December 1st. Specifically, Judge Mazzant wrote that overtime eligibility must be determined by job duties, not salary levels. If that ruling stands, that would not just change the new rule, but could throw out parts of existing overtime rules, which allow workers to be exempt from overtime pay if they make more than $455 a week.
The legal battle will likely continue and it is impossible to predict the results. A lot of that likely depends on how President-elect Trump handles the matter. In the past, Trump has said that he would prefer an exemption to the rule for small businesses, but it’s unclear whether he believes overtime eligibility should be determined by salary or not.
You may feel frustrated because you prepared for a rule that might not take place. As we wait to see what happens, here are some suggestions for what to do while the law remains in limbo.
Carefully weigh your options
If you have made changes in anticipation of the new overtime rule, don’t jump at the opportunity to reverse all of them just yet. In fact, some of the changes you made might be very hard to overturn.
For instance, to retain their exemption, you may have issued salary increases to some employees. Cutting their pay in response to the ruling could be devastating to morale. As much as employees appreciate pay raises, they hate pay cuts even more, especially if it means they will have to continue working long (and potentially unhealthy) hours. If you absolutely feel the need to cut their wages, at least consider not lowering it all the way back down to their previous level. And above all else, explain it to them with empathy.
Similarly, you may have switched some of your exempt salaried employees to hourly, non-exempt positions. While some employees may have resented being shifted into a non-salaried role, others may have actually looked forward to the opportunity to make overtime wages. Talking to your workers about how they perceive the changes and explaining the various considerations you are weighing is a good idea no matter what decision you make.
Hourly workers are still non-exempt
If you still have salaried employees making below the planned threshold ($47,467), then you can continue operating as you always did. They do not have to be paid overtime.
However, if you have already switched some of these employees into hourly roles, they are non-exempt, no matter how much money they are making. If you want them to be exempt, you must salary them. Otherwise, you must continue to track their hours and pay them overtime wages.
Job duties still matter
The judge’s ruling nixed the salary threshold, however if the ruling stands, there will still be definitive rules that determine whether an employee can be exempt based on job duties.
Employers that confuse “job duties” with “job title” could find themselves in hot water. Simply classifying an employee as a “team leader” or a “supervisor” is not enough to exempt them from overtime pay. If you are faced with a complaint or an audit, you will need to provide proof that the primary duties of your exempt employees are in line with the Department of Labor’s definition of executive, administrative or professional work.
According to the DOL, a professional exemption can apply to workers whose primary duty involves work “requiring advanced knowledge” that is “predominantly intellectual in character” and is based on knowledge or skills that were typically developed in a “prolonged course of specialized intellectual instruction.”
The administrative exemption applies to workers whose main duty is “office or non-manual work directly related to the management or general business operations” and who regularly exercises discretion and independent judgment on “matters of significance.”
The executive exemption applies to those who manage a company or a recognized division of a company AND regularly directs the work of at least two other employees AND has the power to at least strongly influence the hiring and firing of other employees.
That means a worker who cleans homes 35 hours a week but then does a few hours of paperwork is probably NOT eligible for exemption from mandatory overtime when he or she works more than 40 hours.
Employee time tracking is still valuable
No matter what transpires with the overtime rule, it’s in your best interests to track employee hours as accurately as possible. If you already have your employees using a time tracking solution, you’ll be able to gain greater insights into how much they are actually working. That will help you determine appropriate pay should you ultimately need to make changes due to the overtime laws.
A reliable employee time tracking system can protect you against allegations of overtime violations that you could face with your non-exempt employees. Explain the benefits of mobile timekeeping to your employees, assuring them that all of their hours will be accurately accounted for and they will only be tracked while on the job.
Don’t panic. Make sure to stay in touch with and seek advice from experts and your attorney. Don’t just focus on legal compliance – think about how the changes you make will be perceived by employees. While no one can predict the ultimate outcome of the overtime rule, keeping an open dialogue with employees can go a very long way.