Federal Overtime Rules Force Rental Businesses to Prepare Regardless of Injunction to Block Enforcement
The U.S. Department of Labor’s overtime rule significantly expanded eligibility for overtime pay. Employees earning up to $47,476 per year must receive time-and-a-half pay for hours worked beyond 40 in a week—a major increase from the previous threshold of $23,660. These updates aim to ensure fair compensation for more salaried workers and are periodically reviewed to keep pace with economic changes.
For rental companies, the adverse impact on their business forced owners to look at remedies to counteract the effect on their costs, and many implemented it before they knew of the injunction:
- Change salaried workers to hourly employees.
- Limit employees to an 8 hour day.
- Hire part-time workers to fill in the gaps.
- Lower employees’ hourly rate to offset overtime that they might earn.
- Raise salaries above the $47,476 threshold.
Many affected by this regulation have been writing letters to Congress to protest what they see as government rules that are detrimental to small businesses. In November 2016, just before the deadline, a Texas judge issued an emergency request that resulted in a preliminary injunction to delay implementation. Employers breathed a sigh of relief, as the Department of Justice gained more time to consider the impact on 4.2 million employees and estimated costs of $295 million to businesses. The ARA (American Rental Association) joined with other organizations to litigate against the regulation.
Though the injunction temporarily blocked the law from going into effect, some employers had already told their employees they would receive a pay raise to get them above the threshold of $47,476. Employee morale can suffer when they anticipate an increase that never happens, so employers need to think through how they will handle employee morale. They must weigh the added overhead cost vs. the possible loss of good employees.
When a new Department of Labor Secretary gets confirmed, either the injunction against it will stand, or be overturned. According to employment law firm, Ogletree, Deakins, Nash, Smoak & Stewart, P.C., there is a risk to employers if the regulations are upheld, and enforced retroactively.
If that happens, employers are responsible for overtime pay to employees under the rules starting December 1, 2016, and would be a disaster for most small businesses.
Regardless of the outcome, the wisest move may be to keep accurate records of hours worked by all salaried employees to make it easier to defend, if needed. The recordkeeping burden is up to the employers. Ignorance of the law, even when the law is confusing, does not absolve consequences.