Companies navigate DOL’s overtime rule injunction

After extensive planning at companies nationwide, the decision by a Texas judge to grant a temporary injunction on the Department of Labor’s new overtime rule has left many companies reeling. Business owners and managers had Dec. 1 circled on their calendars, the effective date for federally mandated wage increases for overtime-exempt employees.

In the private sector, Phoenix Home Care Inc. brought its plans to a screeching halt when U.S. District Judge Amos Mazzant made his ruling about 10 days ahead of the scheduled revisions to the Fair Labor Standards Act. But in the nonprofit corner, Springfield Ballet Inc.’s directors already ironed out salary and workflow adjustments – and they’re upholding those decisions.

“We did take the path and the stance with the ballet that it was just a pause and just to proceed because we felt that the employees that were receiving the raise to stay exempt deserved the raise,” said Candida Deckard, the human resources chairwoman on the Springfield Ballet Board of Directors. “We weren’t going to retract what was offered.”

Board members voted in October to issue a couple of raises, move one position to salary nonexempt and shift some part-time duties.

Announced by President Barack Obama’s administration in May, the plan to double the threshold for overtime exemptions to $47,476 in annual earnings was expected to impact 4.2 million workers.

At Phoenix Home Care, about 65 employees would have been impacted out of a leadership team of 250, said Phil Melugin, founder and president of the five-year-old company.

“Each individual employee would have been looked at specific to their responsibilities and the amount of supervisory and managerial responsibilities that they had, which could have led to more or less overtime being needed or just over 40 hours a week,” Melugin said, noting he wasn’t surprised by the ruling because the outcome of the presidential election likely strengthened the judge’s move.

Though holding off on changes, Melugin said the company is still prepared, after evaluating and outlining compensation, to restructure from salary to hourly positions.

‘Ready, set, wait’
Karen Shannon, human resources and business consulting director for Ollis/Akers/Arney, encourages companies to adopt a “ready, set, wait” philosophy and to take advantage of the delay to assess future steps.

“If you haven’t made changes yet, it might be appropriate to hold on those,” she said. The duties test – a series of questions to compare job functions to the DOL’s requirements – is essential in a company’s assessment, she said. “If you have positions that haven’t had the duties test applied or they failed the duties test, it would be appropriate to go ahead and reclassify those jobs because they’re not meeting the current regulations.”

As to what’s next, a blog on law firm Spencer Fane LLP’s Human Resource Solutions page calls the fate of the new overtime rules an open question for three reasons: First, as a preliminary injunction, the court may revise certain aspects; second, the final order can be revised or reversed on appeal; and third, “The new OT rules were vulnerable to challenge by the next Congress and/or modification by the new Secretary of Labor to be named by the Trump administration.”

Adjustment plans
Considering the DOL rules had been in the works publicly since the official notice was posted in July 2015, the Springfield Ballet’s Deckard thought it was adequate time for organizations to adjust. In response to the notice, the DOL received 270,000 comments that helped shape the final rule.

“At the very heart of it, the ballet was very supportive of its staff,” said Executive Director Evan Bennett.

According to its website, Springfield Ballet has 12 staff members, six of whom are instructors.

Sam Pippen, senior financial director with Breast Cancer Foundation of the Ozarks, said the rule would have impacted less than 10 employees, but it was discussed with managers at their monthly meetings for the last six months.

“Our plan, and we try to do this regardless of the overtime rule, is to keep our folks at a 40-hour workweek. A lot of people that work with us are part-time people. So, obviously, under normal circumstances they wouldn’t approach the 40-hour week,” he said.

On the larger corporate scale, O’Reilly Automotive Inc. (Nasdaq: ORLY) spokesman Mark Merz said the company is in evaluating mode.

“We have been planning for the implementation of the updated requirement for a very long time; over a year,” he said. “Now that this temporary injunction has been issued, we are in the process of evaluating what impact, if any, that has on our plans that we had previously put into place.”

Twenty-one states filed for the preliminary injunction in October, but Missouri was not one of them.


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