Reaction has been mixed to a federal court’s decision to block a U.S. Department of Labor rule last month that would have extended overtime pay to millions of Americans, as anxious employees and employers wait in limbo.
The change would have reduced the number of workers qualified for the “white collar exemption,” which allows employers to bypass overtime pay for salaried employees earning more than $23,660 annually.
Had the rule gone into effect on Dec. 1, it would have raised that cap to $47,476. However, a federal judge in Texas who heard legal challenges to the new rule from 21 states determined the unilateral change proposed by the DOL exceeded the agency’s congressional authority.
Alabama Attorney General Luther Strange, who joined that legal challenge on behalf of the state, said the new threshold for overtime pay would have had significant effects on smaller businesses and on state and local governments that are already “cash strapped.”
After the decision, Strange said the preliminary injunction ensures a number of government agencies “will not be forced to lay off employees or cut vital services” to cover the cost of complying with the new rule.
That said, the U.S. Department of Justice has appealed the decision in Texas, claiming the overtime rule was the result of a “comprehensive, inclusive rulemaking process,” and the administration is confident in its legality.
Either way, because implementing the changes required larger corporations to get a head start, a handful are moving forward with new policies regardless of what happens in court, and that will affect a number of local employees.
Wal-Mart had already raised salaries for its entry-level managers to $48,500 in anticipation of the law, and last month the retail giant said it has no plans to reverse course. The same is true for changes made by TJX — the parent company for T.J. Maxx and Marshall’s stores, both of which have locations in Mobile and on the Eastern Shore.
“At TJX, we attribute our success primarily to the people we have hired over many years who remain focused on our mission of delivering amazing values to consumers,” a TJX spokeswoman told Lagniappe. “TJX had communicated to impacted associates in advance of the expected effective date of the proposed changes to the Department of Labor’s rules and moved forward as planned in implementing those changes.”
Ultimately, what will become of the proposed rule is unknown, though it will most likely not be clear of legal hurdles by the time President-elect Donald Trump takes office in January.
In the past, Trump has spoken out against President Barack Obama’s executive rule changes, and in general has supported the type of business groups that were vehemently opposed to the overtime changes.
However, just because the rules governing overtime aren’t changing immediately, that doesn’t mean the DOL is going away. According to Maria Harkins, who spent 10 years as a DOL investigator, growth in Mobile and Baldwin counties will continue to put businesses under federal scrutiny — something Harkins has turned into a business herself.
“I’m trying to get folks to realize the Department of Labor is still out there,” Harkins said. “What I’m trying to do with my company — Compliant Smart Consulting — is make employers aware that, if they come into compliance, they can avoid the hassles of an investigation.”
Harkins started her consulting company earlier this year after spending nearly a decade conducting federal wage and hour investigations in Alabama and Mississippi. She left that position in the federal government after she began to feel there weren’t enough protections for well-intentioned employers.
Though Harkins said the Fair Labor Standards Act was certainly necessary when President Franklin Roosevelt signed it in 1938, she claims the changes to the law since then have always favored employees, never employers.
“I don’t mind both side of of the streets being even, but they’re not,” Harkins said. “The only thing protecting an employer are attorneys that can help if they get in over their heads, but the services I provide can help ensure employers never get to that stage.”
Today, Harkins works with private and public employers to bring their business practices into compliance with laws that frequently change and often come with steep fines. In fact, federal fines for labor violations increased significantly in 2016.
In June, penalties for “willful violations of minimum wage or overtime provisions” increased from $1,100 to $1,894. Violations of child labor laws, which can be assessed for things like minors using improper equipment, are now penalized with fines of up to $12,080.
According to Harkins, for a business to fall under the purview of the DOL, it has to generate at least $500,000 in annual gross receipts or have the equivalent of two full-time employees. Other than ensuring they’re paying the minimum wages set at the federal and state level, Harkins said the most important thing employers can do is keep accurate records of their payroll.
“If you’re not keeping accurate records, that’s a violation of the law in and of itself,” Harkins said. “The burden of proof always falls on employers to prove they’re paying employees correctly, and the only way to do that is with those records.”
Pointing to a number of recent lawsuits targeting restaurants and bars over illegal tip pools, Harkins said many businesses can fall victim to information they don’t have or grow to a size that triggers different federal regulations.
“Just before I left the Department of Labor, I met an employer who’d been in business 30 years and had never been investigated, but he’d been lucky,” Harkins said. “Labor laws have changed a lot over the last five years, and we don’t know what changes will come with a new president.”
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