Efforts to block an upcoming increase in overtime eligibility under the Fair Labor Standards Act (FLSA), set to go into effect on Jan. 1, have employers in a holding pattern.
The change, which would raise the annual salary threshold for white-collar workers to qualify for overtime to $58,656, is currently being challenged in a Texas federal district court. The judge presiding over the case seems poised to side with the challenge, arguing recently that the Department of Labor overstepped its authority when it issued the rule. Even if it does go into effect, President-elect Donald Trump might partially or fully repeal the policy upon stepping into office, Bloomberg Law reported.
Sound familiar? After Trump’s first presidential win in 2016, a Texas district court temporarily blocked a similar Obama administration overtime exemption change. Then, in 2019, the Trump administration announced new overtime rule changes, though the increase was lower than that proposed by the Obama administration.
“If this rule change goes through, there is a fairly sizable cost implication for employers,” Erika Johnson, director of work, rewards, and career at WTW, told HR Brew. She said her clients are questioning how much effort they should put into preparing for the change, given the injunction in 2016. “How much time and effort do we want to spend preparing for this change? Do we want to delay action? Do we want to delay communications around it until we know for sure?”
While the overtime rule change may soon be on the chopping block, HR and compensation professionals have to proceed with preparations and stay on top of new developments.
Have a contingency plan. People professionals should start planning for how their compensation policies might change should this rule go into effect, experts told HR Brew.
“Anyone who’s responsible for both the compliance and compensation side needs to put together what I would call a contingency plan at this stage,” David Lewis, national managing director of HR consulting at Gallagher, said. Employers should consider which workers might be affected by the new salary threshold and could require overtime pay because of their workloads, and what financial impact that might have on the company.
People leaders should also be wary of making any announcements or implementing visible changes in internal HR systems until there’s more certainty about the rule’s fate, Johnson said.
Quick-to-read HR news & insights
From recruiting and retention to company culture and the latest in HR tech, HR Brew delivers up-to-date industry news and tips to help HR pros stay nimble in today’s fast-changing business environment.
HR teams should keep in close contact with several internal and external partners as they prepare for the unknown, and rely on their internal and external counsel, particularly local labor attorneys, who can interpret how the law might impact their organization. They should also work with their payroll and timekeeping administrators, and their organization’s finance and risk management team.
If the rule does go into effect on Jan. 1, Lewis said organizations should keep long-term plans in a “proverbial glass fire extinguisher box” and wait to break it should new rules be announced by the Trump administration.
Employers could also assess and reassemble employees’ workloads to avoid them having to dip into overtime, Johnson said. Still, she noted that this approach “wouldn’t be something you could do overnight,” as it would require heavy logistical lifts like coaching managers to discourage employees from logging long hours.
Yes, this is a lot of work for something that probably won’t happen. Sorry, folks. But there may be one silver lining: You can lean on colleagues who navigated this uncertainty back in 2016.
“I think most seasoned HR and compensation professionals in collaboration will come up with a good contingency plan here,” Lewis said. “They and their bosses are going to be anxious to get closure, though.”
