FLSA Overtime Rule Halted: What Should Small Business Owners Do Next?

On November 22, 2016 – a mere nine days before proposed U.S. Department of Labor FLSA overtime rule changes were to go into effect – a bombshell court announcement dropped causing many HR departments across the country to ask “what should I do next?”:

From The National Law Review:

“The [immediate halt of the proposed FLSA overtime rule change] is expressly nationwide in scope, including applying to states that did not join in the lawsuit. Accordingly, pending further action, the December 1, 2016 implementation date of the Final Rule is postponed and employers need not adjust salaries upward in order to continue to claim exempt status.”

U.S. District Judge Amos L. Mazzant from Texas ruled that businesses [and state goverments] would face serious financial harm if this law came to pass and he’s right. When you look at this case from a purely financial perspective, halting the rule is a WIN for employers who -for the time being- will not have to pay overtime for employees making more that $455 per week. Also, the amount of resources state governments would need to allocate to education, oversight, and enforcement of the Obama administration’s proposed change would come at a significant price tag for taxpayers across the nation.

However, the rule change was never meant to be about employers in the first place. Now that the ruling is halted (and an impending Trump Administration is only days away from taking office), employees are left out in the cold and look to lose out big time. The probability of the Rule passing “as-is” in a Republican-dominated Federal Government is slim to none. Therefore, employees making between $455 a week to $921 per week LOSE out on potential overtime pay when asked to work more than 40+ hours in a week. That’s over 4 million Americans who go back to square one with unpaid overtime.

So, what do small business owners across the US need to do sooner rather than later in order to be proactive about addressing staff concerns? Here are my suggestions:

Pause for a second to take it all in and catch up to speed with news reports on the subject. I find that a balance of business (Forbes) and law (National Law Review) outlets are a healthy place to get a holistic view of the ruling and it’s implications. You want to be informed about the ruling before taking action. It’s better to wait until you have the facts than to make an un-calculated move in either direction with the steps I suggest next.
At the Senior Management-level, decide how to proceed in light of the halted rule change. Even though the DOL ruling is halted, employees will look to you for guidance about their pay and you’ll need to address whatever was promised about their duties and compensation when the rule was set to become law. Questions to ask amongst your leadership team include:
1. Has our staff already bought into the changes and does it make sense to just continue as planned?
2. Who will be negatively affected if we move forward/pull back?
3. Are there cost-benefits to moving forward with changes?
4. What relational/employee morale costs are at stake by moving either direction?
5. Do we have the HR expertise to handle this tough issue our do we need to reach out to Jumpstart:HR?
Once you’ve done your homework and consulted with an expert, develop a response to staff about whether or not changes are still going to happen and your official position (or “Why”).
1. Will you still convert salaried employees to hourly?
2. Will employees be required to track time on time sheets?
3. Will you uphold the changes you were planning to make to your employee handbook?
4. Will staff get those raises you promised? (Especially the ones who were going to receive raises that would push them into the category of “overtime exempt”)
Execute with clarity but keep a close eye on what happens in Washington. Remember, the rule is halted and it could go into effect at a later date “as is” or with modification. You’ll want to stay updated on changes as they develop and give your staff proper updates.