A recent report has shown that many employers are unprepared for the new overtime regulations scheduled to take place on December 1.
 |
Littler Mendelson P.C.’s 2016 Executive Employer Survey Report found that 28% of employers have adopted a “wait-and-see” approach to the new Fair Labor Standards Act (FLSA) rule.
Tammy McCutchen, an attorney in the firm’s D.C. office and former administrator of the U.S. Department of Labor’s (DOL) Wage and Hour Division (WHD), said that such an approach is ill-advised. “I do not think employers should be waiting,” she told HR.BLR.com®.
Survey Findings
The survey, which polled 844 Littler clients, asked in-house counsel, human resource professionals, and C-suite executives to share their level of preparation for the changes that take effect December 1. The rules will increase the salary threshold for FLSA’s overtime exemptions to $913 per week, which amounts to $47,476 annually. The current threshold comes out to $23,660 annually.
The polling took place before the final rules were released in May, but it still found that 65% of employers were conducting audits. Twenty-eight percent, however, had done nothing.
McCutchen said she was surprised how many employers had taken no action, even considering the rules were only in the proposed stage. “We knew there was going to be a salary increase; we knew that,” she said, referring to the proposed $50,400 threshold. “It was a fairly easy thing for employers—even before the final rule—to check and see who was below that. Twenty-eight percent of Littler clients had not even done that.”
“Talking to clients now, it seems like everybody is on the move but my instinct is that there are still many who haven’t done anything,” McCutchen said. The number of employers who are unprepared probably would be higher if the survey had included all employers nationwide, not just those who are Littler clients. It’s not the employers with human resources staff—those who read trade publications or that are Society for Human Resource Management (SHRM) members—who aren’t ready; it’s small businesses that may not even know about these regulations, she said.
Littler’s report also asked employers whether they had:
- Raised salaries or reclassified some employees as nonexempt in anticipation of the rule going into effect (18% said they had);
- Reviewed and updated job descriptions for exempt employees (28%);
- Updated internal systems to better track hours for employees who will be reclassified as nonexempt (14%); and
- Revised or adopted new wage and hour policies (8%).
Enforcement Expectations
Despite various efforts to block the rule, it likely will take effect, McCutchen said, and employers can expect the DOL to be “out on the street” enforcing the provisions December 1.
Luckily, it seems that most employers realize this. Eighty-two percent of employers polled told Littler they expect DOL enforcement to impact their workplaces next year, but only 31% said that impact will be “significant.” McCutchen said that number doesn’t surprise her: “DOL has limited resources.”
“To me, the significance is the jump from 18% in the prior year. I think what that tells you is that employers are experiencing more interactions with DOL than in prior years.” DOL’s enforcement numbers support that theory: “In the last five years we’ve had a significant increase in wages collected, and I don’t see any reversal in that trend,” McCutchen said. This means employers are becoming more aware that the DOL is out there investigating and going after maximum damages and penalties.
Employers also probably remember how McCutchen’s WHD enforced the last overtime update in 2004. Rather than waiting for employee complaints, the department exercised its authority to initiate investigations. Employers are probably expecting that to happen again, she said.
Tomorrow we’ll look at the implications for employers who are waiting to address the new overtime regulations.