Yesterday we looked at a recent report that showed how many employers are waiting to prepare for the Department of Labor’s (DOL) new overtime regulations. Today, we’ll look at what the implications of waiting might be.
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Employer Steps
DOL’s preparedness—coupled with employers’ lack of preparedness—is a problem because the reclassification process can take up to 6 months, McCutchen said in a statement accompanying the report.
“You have to look at everybody in your workforce who you’re currently treating as exempt who doesn’t meet that threshold and decide what you’re going to do with them,” she said.
If an employee is just a few thousand dollars shy of the threshold, McCutchen says she’s seeing employers choose to increase wages. But more than that, and employers are opting to reclassify.
But overall, “I don’t think—based on the clients I’ve been helping—that employees are going to see their take-home pay increased,” McCutchen said. Employers are instead creating “cost-neutral” compensation plans, ensuring that employees’ pay neither increases nor decreases.
Numbers aside, employers may find that workers are most unhappy about punching a clock and loss of flexibility, McCutchen said, adding that the full effect won’t be seen until December.
The ‘Wait-And-See’ Approach
If employers still want to take a “wait-and-see” approach, they should delay implementation—not preparation, McCutchen said.
Some trade associations have discussed challenging the rule in court, but McCutchen said employers shouldn’t bank on that. “It’s not an easy case to bring,” and litigation is always uncertain. “Even if a suit was filed tomorrow, would they be successful in getting a stay? It’s always hit or miss,” McCutchen said.
If you want to wait and make sure the rule really is taking effect, that’s fine, McCutchen said. But you need to be ready to implement the changes by December 1.
McCutchen previously recommended that employers adopt the necessary changes during Thanksgiving week because the effective date falls on a Thursday—an indication that nobody involved ever worked in the private sector, she said. (Her 2004 rules took effect on August 23, a Monday.) Adopting the changes a few days early would allow employers to avoid reclassifying an employee as nonexempt in the middle of a workweek, which could create wage and hour problems.
That recommendation is even more important now in light of recent litigation. McCutchen said she is involved with a case in which an employer had to reclassify an employee in light of the new home care exemption regulations. Those rules also took effect in the middle of a workweek, and the employer did not implement the reclassification until the week after the effective date. The DOL is seeking back wages for the half of the week that the employee was misclassified.
“We’re trying to talk DOL out of it because it’s going to have an impact here,” McCutchen said. But, either way, “you’ve got to get it changed before—or at least by the week that contains—December 1.”