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By Ben Penn
May 12 — Plaintiffs' attorneys say they expect some employers to botch their response to the Labor Department's imminent overtime rule, so they plan to do expansive employee outreach.
“Once the regulation's done, that’s only the beginning,” Michael Hancock, of counsel at Cohen Milstein Sellers & Toll PLLC in Washington, told Bloomberg BNA. “Then it's really up to all of the players in this to make sure that everybody understands what the changes are and what impact they have on individual workers.”
The DOL's Wage and Hour Division could finalize in the coming days revisions to the Fair Labor Standards Act regulations that would make more workers eligible for overtime pay. The controversial rule is now under final review at the White House Office of Management and Budget (50 DLR A-1, 3/15/16).
At present, workers who earn more than $23,660 per year are exempt from overtime if they also perform certain types of job duties. The final version of the 2015 proposal (RIN:1235-AA11) (125 DLR AA-1, 6/30/15) will likely lift the salary threshold of that white collar overtime exemption to about $47,000 and index it to inflation each subsequent year (82 DLR A-12, 4/28/16).
The substantial boost to the salary threshold would make millions of employees eligible for time-and-a-half when they work more than 40 hours a week, the DOL has estimated. But plaintiffs' attorneys are concerned that employees won't see the regulation's intended benefits unless they know it exists.
As is, they see outreach on the rule as a chance to correct a misconception about the FLSA's existing overtime provisions. “There is a common misunderstanding, particularly among employees, that if I’m paid a salary, I’m not entitled to overtime, period,” Hancock said.
In theory, adapting to an amended bright-line, salary-basis test should be a simple process for employers, attorneys interviewed by Bloomberg BNA said. However, they view the outreach and education phase as essential to preventing businesses from willfully or unintentionally withholding time-and-a-half wages for hours beyond 40 in a workweek.
“There will be a significant minority” of employers that will “hope that they can skate by for a while without paying them overtime,” Greg McGillivary, a senior partner at Woodley & McGillivary LLP in Washington, told Bloomberg BNA.
The plaintiffs' bar is also preparing for businesses to erroneously assume that “now that the threshold is whatever it is, that anybody that makes more money than that isn't eligible for overtime compensation,” McGillivary said. “I foresee that being a big problem.”
Workers exempted under the salary test could still be owed overtime if they don't meet the FLSA's primary-duties test, which examines whether an employee is a bona fide administrative or executive employee. The duties test has no bright line. Although the DOL's overtime proposal left open the possibility for revisions to the duties test, most observers doubt the department will amend the current-duties standard in the final rule.
Employers are already in the midst of auditing workers' job duties and hours in preparation for the final rule, management attorneys recently told Bloomberg BNA (71 DLR C-1, 4/13/16). These audits will lead to some workers receiving raises that put them above the new threshold or being converted to overtime eligible. McGillivary isn't convinced those tactics will be legal.
McGillivary said he's concerned that employers, after conducting audits, “maybe they added the job duty or changed a job title to make them appear to be exempt when really, when you get behind their duties, they’re nonexempt.”
These potential errors mean “the immediate challenge is just educating the workers,” he said.
Management-side practitioners are also predicting employers are at risk in this process. Even though a salary-level increase “is fairly simple to understand, businesses that are not careful about how they handle the adjustment of pay and the reclassification of employees or the attrition of employees related to the changes” could “see employees who are dissatisfied going to plaintiffs' lawyers,” Brett Bartlett, a partner in the wage and hour litigation department at Seyfarth Shaw LLP in Atlanta, told Bloomberg BNA.
Workers will raise questions about their wages, classification and whether they were treated fairly, Bartlett said.
In addition to the DOL's efforts to educate the public on the new overtime coverage requirements, the responsibility will fall on the plaintiffs' attorneys to use their established access to workers, Catherine Ruckelshaus, general counsel at the National Employment Law Project, told Bloomberg BNA.
Many private lawyers have brought important class action cases for workers “who claim they’ve been misclassified as exempt managers for overtime, so they’ll be in a good position, too, to do outreach and education,” Ruckelshaus said. “The private bar has, in some cases, more direct access to workers” than the DOL.
Attorneys will have a host of techniques at their disposal to reach workers, said Hancock, who was involved in the overtime rulemaking at his previous job as the Wage and Hour Division's assistant administrator for policy. They can spread the word through worker centers and unions or inform the public via webinars and websites, he said.
Andrew Frisch, a partner at Morgan & Morgan in Fort Lauderdale, Fla., told Bloomberg BNA that his firm will be using radio, television and online advertising to inform employees of their new rights under the rule changes. Frisch has also been educating the public through his blog devoted to overtime law.
Informing employees is particularly important considering that many workers are already reluctant to come forward with overtime complaints because of the risk of retaliation, Ruckelshaus said. “It's a constant struggle, and it's not unique to overtime.”
At a certain point, attorneys will switch their focus from outreach to enforcement, but the exact timing is up for debate.
For starters, the number of days between the rule's publication and effective date is not known. The DOL must provide a minimum of 60 days by law, but OMB officials have been querying stakeholders at recent meetings about the amount of time it would take a company to comply. This has led to speculation that a lengthier period of time could be under consideration.
Once the agency allows enforcement of the overtime rule, the private bar will need to consider the appropriate time to bring a lawsuit if it learns of any overtime violations.
Ruckelshaus said she thinks there will be a period of adjustment before private enforcement picks up. Initially “there's not going to be a lot of money at stake, or at least not enough to get a lawsuit going,” she said.
By contrast, Louis Pechman, of Pechman Law Group PLLC in New York, said the rule will only add to the recent swelling of private FLSA litigation (227 DLR A-8, 11/25/15).
“Across the United States, there has been a surge in overtime pay lawsuits,” Pechman told Bloomberg BNA. “This change will add gasoline to that fire as many employers will not be in compliance with the Department of Labor regulations.”
Worker outreach during the rule's implementation could also yield new claims from employees who are already misclassified as exempt under the current FLSA rules. “We think there are going to be a lot of people who were misclassified who probably are going to feel a lot more comfortable coming forward and challenging the prior misclassification,” Frisch said.
In other words, education about a salary threshold update may lend itself to rectifying previous misconceptions about established overtime law.
The overtime regulation's rollout will be an “opportunity to start reaching out to employees and suggesting they may want to take a look at the compensation practices and make their own independent decision about whether they’re being properly classified,” Hancock said.
To contact the reporter on this story: Ben Penn in Washington at firstname.lastname@example.org
To contact the editor responsible for this story: Susan J. McGolrick at email@example.com
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