What Mr. Obama’s call for new overtime rules means to you.

by Michael Haberman on March 18, 2014 · 0 comments


 

Changes in the FLSA will require more people to track their time.

Changes in the FLSA will require more people to track their time.

One headline declared “With A Swoop of His Pen Obama Makes Millions Workers Eligible For Overtime Pay.” This refers to the speech that President Obama made regarding changing the overtime regulations. The President said he was going to direct the Department of Labor to revise the Fair Labor Standards Act, first passed in 1938 and last revised in 2004, in order to make more people eligible for overtime. So what is this going to mean to you in HR?

What is this about?

Since Obama has been in office the Department of Labor has been accusing businesses of being thieves and stealing wages from American workers. The President now says that the Republican Party stands in the way of American workers getting paid for their hard work and so with his “pen” he is going to “fix” that situation. In reality Congress passes laws. There is no new law needed in this case. The Fair Labor Standards Act (FLSA) already exists. It has been revised before and it can be revised now without an act of Congress. So the flourish of the “pen” was election year politicking.

The whole argument centers around who is eligible to be exempt from being paid overtime. What EXEMPT means causes many employers problems. Indeed many small employers do not have a good understanding and thus people don’t get paid overtime when they should because they are misclassified. This is error by omission not crimes by commission. Most employers do not purposely steal money from employees.

In reality if you follow the current rules on who is to be considered exempt, a company would not misclassify employees as exempt. It is not based on title and it is not based on whether or not the person is paid a salary (though being paid a salary is a necessary component.) There is a salary basis test, there is a job duties test; which is more strict than is generally believed; and there are specific statements on who CANNOT be an exempt employee.

In need of a revision?

Is the FLSA in need of revision? Absolutely! It is a law made in 1938 for a world of work that is very different from today. It has no provision for quality of work produced by an employee just the amount of time someone puts in. Thus a concept of work like ROWE (results only work environment) cannot gain any traction. The current FLSA was not designed for a mobile economy where anyone can work from anywhere at any time. So I definitely agree that it is in need of revision and that revision needs to be greater than just changing stated salary levels and going back to declaring that a certain percentage of time has to be met in the performance of work.

When would the revision take place?

If you are an employer you have time before you will have to do anything. If you are an employee expecting a pay increase don’t hold your breath. When rules such as this are changed it takes time to do the revision. The revisions have to be written. They have to be announced in the Federal Register. The DOL would have to collect public comment on the proposed regulation changes. Then changes are made and published in the Federal Register with a later date of actual implementation. My guess is that even if the DOL had been working on these changes and could publish them immediately there would be no implementation prior to 2015. Despite all the news report the presidential memo actually gives no guidance to the DOL beyond making some revision. That is why I don’t think this will occur anytime soon.

Action to be taken

All this hullaballoo about overtime has made it clear that the USDOL has it on their radar. Indeed they have already announced that employee misclassification is at the top of their agenda. That effort has already been underway. If you, as an employer, have not looked at your compliance with the FLSA now would be a time to do it. Review your job descriptions and your pay practices and if necessary get some help from legal counsel or from an HR consultant working under legal guidance to correct your issues before they become legal problems.


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