Help

BI’s Article search uses Boolean search capabilities. If you are not familiar with these principles, here are some quick tips.

To search specifically for more than one word, put the search term in quotation marks. For example, “workers compensation”. This will limit your search to that combination of words.

To search for a combination of terms, use quotations and the & symbol. For example, “hurricane” & “loss”.

Login Register Subscribe

Employers to work overtime on legal defense

Reprints
Employers to work overtime on legal defense

Employers should brace themselves for more litigation from unhappy employees and regulators as a result of a U.S. Department of Labor rule, effective Dec. 1, that doubles the salary threshold at which white-collar workers are entitled to overtime pay.

The new threshold is $913 a week, or $47,476 annually for a full-time employee, compared with the current $455 a week or $23,660 annually.

Experts say possible responses to the rule include raising workers’ salaries so they are exempt from overtime, moving workers from exempt to nonexempt status, and/or reducing hours.

Regardless of what employers do, however, most experts say more regulatory action and litigation should be expected because of the rule.

There were 19,322 Fair Labor Standards Act-related lawsuits filed in federal courts for the 12 months ended Sept. 30, 2015, which was a 7.5% increase from the comparable period ending Sept. 30, 2011, according to the U.S. District Court system.

FLSA litigation “has been hot for a long time, and there will be many new opportunities with this new rule for employers to make mistakes that could result in class and collective actions,” said Robin E. Shea, a partner at Constangy, Brooks, Smith & Prophete L.L.P. in Winston-Salem, North Carolina.

“They’ll have this whole new group of employees who used to be exempt who aren’t exempt anymore,” said Ms. Shea.

There is also the potential to inaccurately track employee’s time, she said.

Travel rules, for instance, including calls made in the car on the way to work, “which are confusing anyway and have never been an issue with exempt employees” may now become an issue with nonexempt employees, said Ms. Shea.

Wayne Imrie, London-based management liability underwriter at Beazley P.L.C., said, “It could also end up driving more traditional” employment practices liability claims if the reclassifications, for instance, disproportionately affect employees within a certain age band. It could also increase litigation by disgruntled employees if it reduces their benefits, said Mr. Imrie.

The federal rule may also conflict with states, which have their own exemption rules, said John E. Thompson, a partner with Fisher Phillips L.L.P. in Atlanta.

Furthermore, “The labor department has been aggressive in recent years” in pursuing these cases, and there is no reason to believe it will not continue to do so, said Jesse Panuccio, a partner with Foley & Lardner L.L.P. in Miami. This will be especially true the first year as businesses adjust, he said.

Experts universally recommend employers conduct wage-and-hour audits immediately.

Act preventively, “before you get a complaint, or you have somebody from the DOL conducting an investigation,” said Emily S. Borna, a principal with Jackson Lewis P.C. in Atlanta.

“You have to take a close look at what your people are actually doing, not just what their position title is, or even their job description, to determine if the exemption really applies,” Ms. Borna said.

Employers must also make sure both their employees and their supervisors “have the right mentality,” said Ms. Shea.

Somebody who had been exempt, and was used to taking whatever time needed to get the job done, for instance, now must stop at 5 p.m. and not look at any email until the next morning, which may be a difficult adjustment for both workers and their supervisors, she said.

Adjusting for this will take time and require frequent interactions between supervisors and employees and frequent reinforcement, she said.

How employers communicate any changes they make in response to the rule is important, said Mr. Thompson.

“There are many ways to convey that to a workforce, some of which are better than others,” but “there are no magic words,” he said. Employers must tailor their message to their workforce, he said.

One thing employers should not do, though, is “buy into the proposition” and assume that what they hear others within their industry are doing in response to the law is okay, said Mr. Thompson. “There’s a lot of that kind of thinking going on right now,” he said.

 

Read Next