Employers may be reeling from what they see as swift and dramatic changes related to employment regulation. In recent months, they’ve found themselves dealing with new rules on union representation elections, an impending expansion of who is eligible for overtime, a more restricted view of the use of independent contractors, as well as an array of new requirements for employers with federal contracts, and more. 
On August 31, The New York Times highlighted President Barack Obama’s focus on worker protections in an article that quoted a former adviser who pointed to a presidential speech in 2011 that set the tone on issues affecting employers.
“It was a set of marching orders to the entire government that increasing income inequality and declining economic mobility are the key challenge of our time,” Dan Pfeiffer was quoted as saying. “Given the congressional gridlock, the president pushed us very hard to pull every lever possible.”
Because of opposition in Congress, Obama hasn’t been able to push through some key employment-related legislation he has championed, such as an increased minimum wage for all employers. But he’s raising the wage, instituting paid leave, and accomplishing other goals on a limited scale since he can issue executive orders that are binding on federal contractors. Agency actions, such as guidance from the U.S. Department of Labor (DOL) and the National Labor Relations Board, also are bringing change. And all those changes have created an atmosphere many employers find disturbing.
More challenges ahead
“The current employment climate remains a challenging one for employers to navigate on the back end of President Obama’s second term,” Mario Bordogna, an attorney with Steptoe & Johnson PLLC in Morgantown, West Virginia, says.
“Because there’s more gridlock getting things through Congress than there is on the I-495 beltway encircling the nation’s capital, the president has chosen to exercise a great deal of his own rulemaking authority to further his labor agenda—at least pertaining to federal agency employment,” Bordogna says.
“In addition, a number of government agencies themselves—many led by appointees of Obama’s choosing—continue on a course of regulatory action which has made life miserable for private-sector employers throughout the country,” Bordogna says. “Nobody should expect this path to change for at least the next 15 months.”
Mark Flora, an attorney with Constangy, Brooks, Smith & Prophete LLP in Austin, Texas, also sees a “less employer-friendly” climate continuing for the rest of the Obama presidency. “The president seems to have hit his stride in his second term, getting his desired results by way of regulation and executive order instead of through legislation,” he says.
Looking to the future
As for what employers should expect for the remainder of the president’s term, Susan G. Fentin, an attorney in Springfield, Massachusetts, expects more of the same. For example, she says many labor and employment attorneys expected the proposed rule related to the Fair Labor Standards Act (FLSA) unveiled in July to be “even more far-reaching.”
The DOL’s proposed rule aims to guarantee overtime pay to most salaried white-collar workers earning less than an estimated $970 a week in 2016. The current threshold is $455 a week. Although the proposed rule, which has not yet been made final, raises the salary threshold necessary for an employee to be considered exempt, it doesn’t limit the amount of nonexempt work that employees can perform and still be classified exempt.
“The DOL has hinted that such revisions might be in the works,” Fentin says. “I wouldn’t be surprised to see additional revisions to the FLSA regulations in 2016.”
Bordogna says although some of the recent changes, such as the FLSA’s outdated salary test, are likely necessary, “many result in a significant 180-degree sea change in direction in rulemaking and law.”
“These abrupt shifts leave many employers reeling because changing rules in areas like wage payment, just to name one example, require meaningful alterations in the way employers do business,” Bordogna says.
In addition to the changes already announced, Flora says employers should expect more aggressive enforcement by federal agencies and long-term change resulting from Obama’s federal judge appointments.
Advice for going forward
As employers adjust to the array of executive orders, new regulations, and agency initiatives, preparation will be crucial, the attorneys say.
“My overarching advice would be to adopt the old Boy Scout motto, ‘Be Prepared,’” Flora says. “We know that the (FLSA) exemption rules will be changing, and so employers need to start reviewing their classifications now and determining what changes need to be made.” He says being proactive is especially important for employers in the restaurant, fast food, and hospitality industries that may have exempt managers or assistant managers who won’t meet the expected new salary thresholds.
Fentin agrees that employers need to plan now. “For employers who are concerned about the changes to exempt status, it’s not too early to plan a strategy,” she says. “This should include a review of pay practices and employee classifications as well as job descriptions.”
Fentin says employers may want to begin now taking steps to convert certain currently exempt employees to nonexempt status if their pay won’t meet the new threshold for exempt employees. But before doing so, she says, employers should make a record of how many hours the currently exempt worker actually works each week, whether those hours fluctuate, and how the hours can be tracked. “This should give an employer guidance as to the financial impact of the change,” she says.
Also, time tracking systems may need to be updated to handle extra employees, and employees who weren’t previously required to track hours will need to be trained, Fentin says. In addition, some currently exempt employees may be used to doing work on their smartphones or laptops outside of the regular workday, and that practice will create wage and hour issues if the employee is converted to nonexempt status.
“I think the hardest thing to overcome for many employers will be the resistance that their workers might have to being considered nonexempt. Exempt status and the ability to ‘make your own hours’ more or less is a prestige issue that some employees may have difficulty accepting,” Fentin says.
“On the flip side, if exempt status of certain employees has been somewhat questionable, the change in the regulations might give the employer some cover in making changes to status that might otherwise have been a red flag about the possibility that overtime should already have been paid to that worker,” Fentin says.
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In addition to changes related to exempt and nonexempt employees, employers that use independent contractors “should undertake a comprehensive—and objective—review of those relationships,” Bordogna says. Employers may need to restructure the relationships to make them less permanent and “scale back on the degree of control” they exercise, he says. Also, employers should emphasize the degree of discretion exercised by the contractor.
The impact of the new union representation election rule also is being felt, Fentin says. “Industries that are targets for union organizing drives should be sure to check with experienced labor and employment counsel so that they are not taken by surprise and have a plan in place if an election is in play,” she says.
Flora agrees. “With the dramatically abbreviated schedules, employers need to be ready for a union election at almost the drop of a hat,” he says. “An employer who waits until it receives an election petition has waited too long.”