New overtime pay regulations from the Department of Labor (“DOL”) were set to go effective on December 1, 2016, but didn’t. A federal judge stepped in with an injunction. Had the regulations gone live, the salary basis threshold for an employee to satisfy the Fair Labor Standard Act’s (“FLSA”) white collar exemptions from overtime pay would have more than doubled. Employees paid below the threshold simply could not qualify for a white collar overtime exemption. The previously-exempt employees would get overtime pay unless they qualified for some other exemption.
One way or the other, there’s a good chance the salary basis threshold will increase over the next several years, although it may not impact as many Americans as the DOL’s new regulations. The DOL estimates that its new regulations promise overtime pay for another 4.2 million American employees. Overall, the newly-overtime-eligible employees would make up 18.6% of the employees who the DOL believes qualify for the white collar exemptions without the new rule. That’s a huge chunk of the workforce who would need to track their hours—when they don’t today. These folks have settled into salaried exempt positions and stopped tracking how much they work. They just get the job done.
Consider the culture shock. Performance expectations may not have changed. So the newly-overtime-eligible employees might forget to record all their hours in the heat of hitting a deadline. They might also be tempted to under-report their hours to impress the boss. Or, to keep the labor budget in line, supervisors may encourage employees to work off-the-clock. No matter the reason, a company could have unpaid overtime hours on its hands.
Right there is the problem. The newly-overtime-eligible employees—all 4.2 million of them—would make a ready recruiting pool for lead plaintiffs in overtime class lawsuits.
It only takes one disgruntled ex-employee to kick off a class. The FLSA lets “similarly situated” employees gang up in a collective action to pursue their claims together. And the Fifth Circuit says that the standard to conditionally certify a collective action is “lenient.” Sure, a company has a shot to decertify the class near the end of the case, but that can be a hollow victory after duking out class discovery.
Let’s get ahead of the curve. The DOL’s regulations bear a quick look. We’ll gaze into a crystal ball to divine what will happen with the salary basis threshold. Then, our article will take a hard right into some common problem areas where companies struggle to track working hours properly. We will finish with a couple of transactional HR moves that can save a company some heartburn.
Read the full article in the Corporate Counsel Review here.