Companies, employees grapple with court’s delay of new overtime rules

Thursday was to have been the day when nearly one-fifth of the employees at Hunt Midwest came under new rules that made them eligible for overtime pay.

“We put a lot of work and time into implementing the Dec. 1 date,” said Marlene Wilkerson, human resources manager at the Kansas City-based company. “We sat down one-on-one with each affected individual.”

At least for now, the efforts were for naught.

The new overtime regulations from the U.S. Department of Labor are on hold along with several other revisions affecting employee compensation. A federal judge in Texas last week issued a preliminary injunction that delayed their scheduled implementation.

The Labor Department on Thursday filed a notice of appeal with the 5th U.S. Circuit Court of Appeals in New Orleans, but the timing and future of the rules remain uncertain.

The revisions, a signature effort under the administration of Barack Obama, would have made time-and-a-half overtime pay available to about 4 million more American workers when they work longer than 40 hours a week.

Judge Amos Mazzant, an Obama appointee to the U.S. District Court for the Eastern District of Texas, responded to employer groups and some states who argued that the new rules overstepped the Labor Department’s authority.

The National Retail Federation was among the groups that sued to stop the new rules from taking effect, calling the changes too big and a hardship on businesses.

Currently, the 12-year-old rules say workers who make less than $455 a week, or $23,660 a year, are eligible for overtime pay. The proposed rules doubled the overtime pay threshold to those who make less than $913 a week, or $47,476 a year.

The changes meant that employers would have had to ask employees who fell in that gap to begin tracking their hours for overtime eligibility, a practice long familiar to hourly workers under existing rules.

While expanded overtime rights were championed by labor and worker-advocacy organizations, some employers ironically encountered employee disappointment when they prepared workers for the change.

It was a “psychological and administrative burden,” Wilkerson said. Some workers rebelled against filling out time sheets. Others said they felt demoted from salaried, overtime-exempt status, even if their jobs or pay didn’t change.

Those burdens may be lifted, but they’re replaced by confusion about what lies ahead under a Donald Trump administration. Consumer groups expect Trump or the new Republican Congress to halt the new rules.

Thus, “we’re waiting until President-elect Trump gets in office and see what happens,” said Jill Crutchfield, senior director of human resources at North Kansas City Hospital.

The hospital didn’t have many employees who would have been affected by the overtime status change, Crutchfield said. She said only a few employees would have become “nonexempt” for overtime or had their base compensation raised slightly to push them above the new threshold.

“But we put everything on hold because it sounds like it won’t happen,” Crutchfield said.

Other employers had already planned for the changes, budgeted for them, and met with affected workers to talk about new time card responsibilities, change their job descriptions or adjust their pay or hours.

Some employers are going ahead with changes because they’d already implemented them.

The city of Kansas City, for example, shifted some pay grades from exempt to nonexempt, making those positions eligible for overtime, said Gary O’Bannon, director of human resources. That made 244 current employees overtime-eligible who hadn’t been before, and fewer than 50 received small pay increases, he said.

Wal-mart Stores raised its entry-level managers’ salaries in September from $45,000 to $48,500 to make them exempt from the expected overtime requirements. The retail giant said this week that it won’t reverse that pay change.

T.J. Maxx and Marshalls also said this week that they are “moving forward as planned” to comply with the new rules, but didn’t specify what that meant.

Some employers were said to be reducing employees’ hours so that they don’t clock more than 40 hours in a week, but work-hour limitations already were being sparked by efforts to avoid insurance coverage mandates under the Affordable Care Act.

Kirk Young, president of JobMatch Assessments in Overland Park, provides client companies with testing to help hire employees with the right fit for the job. He said he was “in the trenches” to see how his 260 clients prepared for the impending overtime changes.

“Hiring at the entry level definitely slowed down in anticipation,” Young said. “Now, maybe hiring will bump up again.”

Young said many employers, seeking to avoid overtime pay requirements, were reluctant to bring in new workers at the higher threshold.

“They said they couldn’t afford it,” Young said. “But they didn’t mind making a pay bump (above the new threshold) for existing employees they wanted to keep.”

Generally, employment law attorneys and human resource experts are advising employers to “stay the course.” If they’ve already made pay adjustments or implemented new job definitions, it might be easier — psychologically and administratively — to stay the course than reverse direction.

Cerner, Kansas City’s largest private-sector employer, would say only that “we’re monitoring developments related to the new standards and are prepared to comply with the law,” said company spokesman Dan Smith.

Other human resource officials suggested that even without the new overtime threshold taking effect, the impending change might have caused some companies to reassess their pay practices.

“If someone was paying $23,000 a year in overtime, they maybe should have added another worker instead,” said one Kansas City area human resource official who requested anonymity so as not to rile professional colleagues.

This story was originally published December 1, 2016 at 5:29 PM with the headline "Companies, employees grapple with court’s delay of new overtime rules."