As expected, the US Labor Department is appealing the injunction issued last week against the department’s controversial rule change regarding overtime pay, in which a federal judge blocked the rule from coming into effect while a lawsuit filed by several states and business groups to overturn it makes its way through the legal system. The case will likely not be concluded before president-elect Donald Trump takes office in late January, and the new administration may choose to drop the appeal and decline to defend the controversial regulation in court, letting it die before it ever goes into effect.
For employers, however, many of whom have already adjusted salaries or schedules in preparation for complying with the new rule, its uncertain future presents a significant challenge. At Compensation Cafe, Jim Brennan posits that this state of affairs will make the US a “living laboratory” for compensation practices in the coming year:
If the rule change is cancelled, rolling back increases already announced and other changes already implemented may be impossible. Right there, another test group will emerge: those who continue with the suddenly stalled new pay mandate and those who instead re-adjust to return to the old system. Broad issues of morale, motivation, engagement, credibility and economic survival will play out before your eyes.
Old pay equity problems and entitlement status issues will get worse. How will you explain why two people doing the same job side by side are paid so differently, if one gets handsome overtime pay and their co-worker receives nothing. Of course, the best excuse will be that the exempt individual already earns a higher salary, thus fitting above the new short test cutoff point. But if there are not orders of magnitude differences in their weekly take-home pay, those gifted with exemption may see this as simple exploitation by a heartless employer. They might be right, too.
On top of deciding how to react to these changes and uncertainty, organizations have to figure out the right way to communicate these decisions to employees. SHRM’s Allen Smith offers some tips from employment lawyers about how to navigate these potentially thorny conversations:
“Employers should carefully consider all communications to employees, particularly promised pay increases that may have triggered employee reliance,” said Kathleen Anderson, an attorney with Barnes & Thornburg in Fort Wayne, Ind.
“If annual increases can be given to those employees who were expecting an increase to at least $47,476 per year, then that should be communicated as well,” said Alfred Robinson Jr., an attorney with Ogletree Deakins in Washington, D.C., and former acting administrator of the DOL’s Wage and Hour Division.
“Those employees, though, may have to have the expectations as to future raises and bonuses managed in light of the bump just given,” noted Robert Boonin, an attorney with Dykema in Detroit.
Timesheet Mobile founder Bob Drainville throws in his two cents at TLNT:
Despite uncertainty around the final overtime rules, it’s best to proactively communicate the latest updates on the rules to your employee before they start to ask questions about how they will be affected. Be upfront with your employees if you are uncertain about how your company will handle the news; it’s okay to let employees know that some answers are still pending. Let your employees know you are currently evaluating the impact, and will notify them once you’ve considered the options.
What you convey to your employees will not only help them understand the changes, but it can also shape their perceptions about you as an employer. Think about the language you use and what you want to emphasize when talking to employees.
For a sense of how businesses are dealing with this reality on the ground, the Chicago Tribune’s Alexia Elejalde-Ruiz interviews some local employers:
Walker Sands had started operating as though the new rule was in effect on Sept. 1, to ensure it was prepared, [the public relations and digital marketing firm’s president Michael] Santoro said. About a third of his 80 employees are affected by the new rule, most of them entry-level salaried public relations professionals who start at $38,000. …
Santoro, who didn’t adjust anyone’s salary and planned to pay overtime when the work warranted it, said the changes forced everyone to be more cognizant of time. The company is holding slightly fewer meetings as a result, and the meetings that do happen seem more productive, Santoro said. Still, the uncertainty of the overtime rule’s fate bothers him.
“The majority of good businesses are ready for the change,” Santoro said. “We should reward those who properly prepared.”