News of the injunction blocking the implementation of the Department of Labor's overtime rule changes has put many small businesses in a difficult spot.
In anticipation of the Dec. 1 compliance deadline, many employers already took steps to comply with the new regulations. Changes that were communicated or put into place have created looming questions around the recent ruling.
The following questions and answers are designed to address some of these common concerns small business owners may have:
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Should businesses still move forward with employee salary adjustments and reclassifications?
An injunction is not a permanent rollback of the overtime rule changes, and could still go into effect after a full review of the case. For now, employers have options based on the conversations and changes they've had with employees.
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Salary adjustments: At the moment, there isn't a requirement to pay overtime to salaried employees who meet the current $23,660/year ($455/week), white-collar salary exemption and fulfill the responsibilities of one of the duties tests. In fact, these employees can remain overtime exempt until the final decision on the case is rendered. If decided to maintain current overtime rules, employers should communicate this clearly to their employees.
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Reclassifications: Due to the timing of the injunction, many employers have likely worked with advisors to make changes to comply with the new rules. Those who have already reclassified employees as non-exempt must decide if they will maintain that reclassification and pay required overtime.
All in all, the injunction does not require that any changes be reversed. Employees could remain non-exempt and overtime eligible.
However, employers that have announced changes may want to consider what reverting could mean, less for compliance-related reasons, but more for employee morale, productivity, and loyalty.
It may be in a business's best interest to wait to make additional changes until a final ruling is issued.
How should employees who anticipated pay increases be handled?
There is no one size fits all approach. However, employers should evaluate the current landscape, then weigh the possible pros and cons of any course of action. Here are factors to consider:
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How are competitors handling similarly situated employees? Valued employees will migrate to companies that offer greater financial reward and benefits.
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Take a look at the business's regular salary increase and bonus schedules. Determine if this increase meets the criteria of these compensation programs, even if it is provided on an earlier schedule than prior years.
It's important that smaller companies work with their accountants and financial advisors on a strategy that works best for their circumstances, and be transparent with the affected employees on the ultimate decision.
Is there an anticipated timeline on a case?
It's unknown when a final decision will be reached.
The DOL has filed a notice to appeal the injunction to the Fifth Circuit Court of Appeals. However, unless an expedited appeal is granted, a new hearing will not occur until after a new administration takes office on Jan. 20.
What will happen to the overtime pay order when President-elect Trump takes office?
In August, Trump told the news site Circa that he hoped small businesses would be exempt from the overtime rule or granted a deferment in having to comply.
Upon taking office on Jan. 20, Trump will be able to name his own head of the DOL, the department tasked with implementing the Fair Labor Standards Act (FLSA), of which the overtime rules are a part.
If the judge in this case permanently blocks the overtime rule changes, the new DOL head can decide not to appeal the decision or they may be asked to make new change recommendations to the overtime rule.
The incumbent President can also request that Congress put forward legislation to scale back the overtime rule changes which he could then sign into law. Prior to the overtime changes being halted, some members of Congress had put forward bills to do just that. For example, the Overtime Reform and Enhancement Act (put forward in July 2016) would have phased in the white collar exemption over four years and eliminated the triennial white collar exemption adjustment.
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