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2016-12-16 / Front Page

Overtime in Limbo

Businesses left to wait for final decision on overtime regulations

On November 22, a federal judge in Texas issued a nationwide injunction against the new overtime regulations that were scheduled to take effect on Dec. 1.

The new regulations would have raised the salary cap below which all workers must receive overtime pay from $455 a week ($23,660 a year) to $921 a week ($47,892 a year).

The judge found that the salary cap raise would be too dramatic in its effects and that the Department of Labor had overstepped its role.

The judge’s order will hold the new regulations from taking effect until further court review.

By requiring employers to pay overtime wages based on salary rather than an employee’s duties, the Labor Department exceeded its authority under the Fair Labor Standards Act and ignored Congress’s intent, the judge said in his ruling. “If Congress intended the salary requirement to supplant the duties test, then Congress and not the department, should make that change,” he said according to the Associated Press.

Marshall Marshall According to Phil Miles, shareholder, McQuaide Blasko, the final brief for the review of the regulation is not due until Jan. 24, 2017, four days after President- elect Donald Trump will be sworn into office.

The U.S. Department of Labor filed an appeal of the ruling on Dec. 1 and most recently, the federal government has sought an expedited briefing schedule to try to get their appeal moving faster in the hopes that they can get it overturned before Inauguration day.

With the new ruling still up in the air, businesses have been put into an awkward position of holding back raises or changes to employee schedules that at one point seemed inevitable.

“This is one of those rare instances where I think those businesses that waited until the last minute benefited a little bit. The businesses that did not implement a bunch of new raises and promise overtime for people they thought would be covered by the new overtime regulations,” said Miles, who focuses on labor and employment law and has written a white paper on the new overtime regulations.

Phillips Phillips Miles advice is that businesses that have waited to implement changes should hold tight.

“I think they should keep waiting. I think that I would say the injunction did not come out of the blue. I was surprised that it was granted, but I sort of knew that this was a possibility. So my recommendation is the same as it was prior to the injunction. Have a plan for what to do if the regulations take effect, but there is no rush in implementing that plan until we know for sure whether these regulations are going to happen,” Miles said.

Some larger businesses like UPMC had plans ready to meet the changes required to meet the new regulations and now may feel pressured either way to put the raises through. Their official stance is to wait.

“Rather than make the changes now and then have to make further or perhaps reverse these changes in the future, we are going to place our planned changes on hold and wait until the final determination has been made,” wrote John Galley, UPMC’s chief human resources officer, in an email to hospital presidents and other UPMC leaders, according the a story from AP.

A spokeswoman for UPMC on Monday confirmed the company’s decision to put the raises on hold, but declined to comment further.

Jack Phillips, director of government affairs at the Rehabilitation and Community Providers Association (RCPA), believes UPMC, along with several other organizations in healthcare, may need to go through with some of the changes. The RCPA represents 325 members in the healthcare industry throughout Pennsylvania, including UPMC.

“Some of the members in our organization notified those individuals that were on the cusp that they were going to get a pay bump and how could they come back now and say, nope we no longer need to fulfill that obligation that we already talked to you about?” Phillips said.

As for the organizations that got ahead of the curve and instituted changes early?

“So far my experience has been that those who did give employees raises to get people over that overtime threshold are keeping the increases not because they are legally required to just because it would be a morale nightmare to take them back,” Miles said.

The RCPA has been long opposed to the new regulations, stating that the changes could put a burden on smaller health and human service providers that are unable to pay higher wages to hourly workers as rates cannot be negotiated if the services are being offered through a fixed system such as Medicaid. The organization noted in a release that they are supportive of higher wages, but see a lot of harm being done to businesses that cannot adjust their model or raise prices.

According to Amy Marshall, shareholder, Babst Calland, industries outside of healthcare also voiced concerns for meeting the requirements.

“The construction industry was going to have an issue along with retail and middle-management. There are certain areas that would be more impacted, which is not to say that if in six months from now there is a decision to put the regulations through, that you shouldn’t be prepared to implement a plan.

I think the intent of the regulation is good. I think the intent of it was to try to increase wages by allowing more people to earn overtime. I think that what was not thought through was that there are a lot of people, with the way that their workforce is structured, where you really disable their ability to carry on the function of their company when you change [the threshold] and that might be the part that wasn’t anticipated.

A lot of people fell into that exempt middle management category where they could go to training and could go to conferences; they could do things because they had access and more freedom that would have to go because they weren’t making that threshold dollar amount. It would be better to graduate that threshold dollar amount in over a period of time. To almost double it in a year’s time makes it a little hard on the employers to meet,” she said.

The chances that the regulation will remain completely untouched seem relatively slim, but there are doubts whether the new administration will either completely remove it or tweak it.

“I think it’s doubtful that it will be put through as it is. This was clearly a very difficult regulation for employers to have to comply with,” said Marshall, who focuses on both labor and employment and corporate and commercial law.

According to Marshall, if the injunction does hold and the regulations are deemed unlawful, there’s a likelihood that the regulation may not be brought back up after the inauguration.

Miles holds out more hope for at least part of the regulations staying.

“Last I saw, he said that he wanted to tweak it and make exceptions for maybe small businesses and nonprofits. I don’t think he has said that he would completely get rid of it.

“There’s enough of a chance that the regulations will happen that they should be prepared.

I think most of them have an idea what their plan [to comply] is and they should keep their plan handy in case they need it,” he said. .

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