The overtime law is delayed. That much we know.
An injunction filed by Federal Judge Amos Mazant III of the U.S. District Court in the Eastern District of Texas delayed the implementation of the Final Ruling by at least six months. The injunction came after a lawsuit was filed by 21 states in the United States District Court in September, claiming that the overtime law was unconstitutional.
But now what? What do you do with your plans or new operational and HR procedures that were put in place (or on the verge of getting rolled out).
To understand how best to navigate the delayed overtime law, we went straight to the source.
HotSchedules spoke with Sarah Tober, the Communications Director for the Texas Chapter of the National Federation of Independent Business. Her organization led the effort to file the original suit to block the overtime law. During our interview, Tober explained the impact of the delay and what restaurants can do now and over the next six months.
This injunction is big. Just how impactful is it?
According to the NFIB, 44 percent of small businesses (143,000 in total) employ at least one employee who would have been eligible for mandatory overtime. Tober says that doubling the minimum wage and doubling overtime would have put a significant cost burden on restaurant owners in a very short amount of time.
“Restaurants had a lot to comply with and many of them were not fiscally prepared for it. So the delay gave these business owners a sigh of relief. Many of them needed time to plan for what new regulations were coming down from the government and that includes health care.”
As Tober sees it, one of the initial benefits of the delay is that restaurants won’t hold off on Holiday hiring. To comply with the overtime rule, many businesses were going to raise salaries starting December 1 – right at the start of the busy holiday season.
What’s the sentiment among those who would have been impacted (operators and employees)?
Tober says it depends on who you ask. “Many small businesses and restaurant owners are comfortable with the fact that there is one less regulation on their plates. The overtime rule was essentially the straw that broke the camel’s back.”
There’s still the question of the DOL’s projection that 4.2 million employees who would have had seen some sort of impact to their paychecks.
“Sure, there are some employees who were happy about the law because it was an opportunity to get a raise,” she said. “The problem comes when they get the news that they’ll be relegated to a part-time role.”
The salaried vs. part-time dilemma was a hot button issue as operators began to fully understand the implications of the ruling. And while Tober can’t speak to individual employees’ reactions, she says that the delay “can only help those businesses that need time to plan their strategy.”
What should operators do if they’ve already adjusted their financial plans to account for the increase?
Operators who have adjusted their financial plans to comply with the new overtime law are one step ahead of the game, says Tober. You may even have a competitive hiring advantage. At the same time, it’s important to understand how you can financially support the growth and hiring efforts in your operation. Can you afford to hire another exempt manager or do you need to hire someone more junior and classify them as non-exempt?
For operators who waited, Tober says to “use this time to get with a CPA, dig into your 2017 financials and find out what the changes could mean to your bottom line. Find out how much it will cost your restaurant to actually comply with the new overtime rules. There’s still a huge effort to fight the new overtime rule, but it’s better to be safe than sorry.”
Use this time to get with a CPA, dig into your 2017 financials and find out what the changes could mean to your bottom line. Find out how much it will cost your restaurant to actually comply with the new overtime rules. There’s still a huge effort to fight the new overtime rule, but it’s better to be safe than sorry. – Sarah Tober, Communications Director, Texas Chapter of the National Federation of Independent Business
Will the overtime law completely go away?
Tober says it’s certainly a possibility. In early December, the U.S. Court of Appeals for the Fifth Circuit announced that it would fast-track the appeal of a nationwide preliminary injunction that blocks the U.S. Department of Labor (DOL) from implementing its revisions to overtime rules under the Fair Labor Standards Act (FLSA). In its appeal, the DOL challenged the preliminary injunction that Tober’s organization initiated.
“A lot can happen in over the six months,” says Tober. The new administration and the succession of appointments to key departments could blur the lines even further.
At the same time, operators and HR professionals who have already made plans and communicated those to employees may be one step ahead of the employee engagement conversation – putting them at a competitive advantage for skilled employees who want to stick around.
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