4 Tips on the Hold of the Final Overtime Pay Rules

As a trusted advisor to your clients, you’ve probably gotten your share of questions about the new Fair Labor Standards Act (FLSA) overtime regulations or “Final Rule” and the latest court ruling blocking the Final Rule from taking effect. In November, a U.S. District Court in Texas issued a nationwide preliminary injunction blocking the Department of Labor’s (DOL’s) Final Rule, which sought to raise the required salary level to qualify for white-collar exemptions. That ruling has since been appealed by the DOL. A final decision by the appeals court is not expected until the new administration takes office.

With these rules on hold, businesses are wondering how to proceed. They want to know: Are the rules going to be retroactively applied? Will they be eliminated altogether? Should operational changes applied in anticipation of the rule remain in place?

The future of the Final Rule is uncertain. In the meantime, here are four key questions you may receive and how you can respond to them:

What should I do about the payroll changes I made ahead of the anticipated rule change? Many of your clients likely spent months preparing for the FLSA changes, identifying workers affected by the final regulations, determining whether to increase their salaries to comply or reclassify them as non-exempt employees, and communicating those changes to their employees. If an employer already notified employees of a salary change, it may be too difficult to reverse that decision. As your client’s counselor, consider advising your client to go ahead with the initial plans and stay the course, especially if they already authorized the change in payroll.
Could the DOL retroactively apply the rule? Yes, the court may side with the DOL and the proposed regulations could be reinstated retroactively to the original effective date of December 1, 2016. For that reason, your clients who decide to maintain the exempt status of impacted exempt employees without raising salaries to meet the Final Rule’s thresholds should consider directing these employees to track their time. In the event the final rule is later upheld and overtime becomes due retroactively, this would help ensure that clients will have an accurate record of employee hours worked.
If the rule is not upheld, do FLSA classifications still apply? Whether or not the rule is upheld, employers remain subject to existing FLSA requirements that dictate proper job classification and payment methods. While the fate of the Final Rule is uncertain, employers should continue to evaluate the exempt status of their employees by carefully reviewing job duties and descriptions to ensure that employees are properly classified in accordance with FLSA requirements. Take this opportunity to make sure employees’ duties match their job descriptions.
How should I talk to my employees about these changes? In deciding how to proceed, advise your clients to consult with internal or external legal counsel and other experts to discuss options available before making and communicating decisions related to this latest development. Employee relations and financial implications should be considered. Your clients should also keep in mind that applicable state laws may require advance notice of any changes in pay. State laws may also govern the overtime exempt status of employees.

While it is still unclear what will happen going forward, advise your clients to take this time to make sure they are in compliance with existing wage and hour laws, including properly classifying employees as overtime exempt or non-exempt. Staying organized and developing a proactive plan will help keep clients prepared for most possible outcomes.

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Aldor H. Delp is Division Vice President and General Manager of Resource and HR Solutions at ADP.

Payroll