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The Business View – November 2016 / Small Business Corner
Guest Columnist: Marc Freedman
By now, most business leaders have heard the U.S. Department of Labor’s (DOL) new overtime regulation will be trouble for employers. By doubling the salary threshold to more than $47,000 with automatic updates, the new regulation will force employers to either increase the salary of currently exempt employees or reclassify them to hourly wage earners, eligible for the overtime premium.
At press time, this new regulation was scheduled to go into effect on Dec. 1, 2016.
The DOL ignored the pleas by employers from all sectors – small business, nonprofit, education, public sector and others – to back off the rulemaking and conduct a third party economic analysis that would show the real impact the regulation will have on employers and employees.
Instead, the administration gave business a regulation that’s been modified in only minor cosmetic ways, just enough for the administration to claim that changes were made but without providing any substantive relief.
And now we see that DOL may not even be an employer’s worst problem. Waiting in the wings are plaintiffs’ lawyers; who see new opportunities to go after employers, who may not even be aware of the new rule. In a recent piece from Bloomberg BNA (Bureau of National Affairs) several members of the plaintiffs’ bar and their allied advocates made clear that they are deciding how they will conduct “outreach” and “education” efforts to inform employees about the new requirements.
Furthermore, just because employers increase an employee’s salary above the threshold will not necessarily mean they are in the clear. There will be an increased scrutiny on whether employees are actually performing the correct duties associated with their exempt status.
One comment in the BNA piece is that “We think there are going to be a lot of people who were misclassified who probably are going to feel a lot more comfortable coming forward and challenging the prior misclassification.”
Employers should also know there is almost no such thing as a single plaintiff overtime lawsuit. If one employee is misclassified, there will almost always be others. These get expensive very fast and are very hard to challenge.
The U.S. Chamber argued in its comments and meetings that one expected consequence of the new regulation would be an increase in litigation against employers – what is referred to in the BNA piece as “add[ing] gasoline to that fire (a surge in overtime pay lawsuits) as many employers will not be in compliance with the Department of Labor regulations.”
Unfortunately our predictions are coming true.
Marc Freedman is executive director of labor law policy at the U.S. Chamber of Commerce.
Click here to read The Business View – November 2016