NEW OVERTIME RULES: READY OR NOT, HERE THEY COME (MAYBE)

RothLawBusiness Services

We posted last summer a series of articles on the new overtime rules.  With those rules now going into effect next month (or perhaps not – keep reading), a short summary seems like a timely exercise.

Florida has no overtime law of its own.  So many local business owners may feel unconcerned.  That would be a mistake.  Federal rules apply to many businesses, even smaller ones.  They are triggered by a gross-receipt threshold, not by the number of employees; by engaging in business across state lines; or by doing business in certain designated industries.

Congress did not set overtime rules.  It passed a law, the Fair Labor Standards Act (the “FLSA”), which mandates that people working for a qualifying employer be paid time and a half for hours worked over 40.  It also allows for exceptions, some broad (like the two that cover managerial/supervisory employees) and others narrow.  But it leaves to the Department of Labor to define the circumstances when the broader exceptions apply.

This is exactly what the Department of Labor did earlier this year.  By raising the minimum amount of money certain managerial employees must make before they can be exempt from overtime pay, it dramatically increased the number of Americans who will qualify for overtime.

The Department of Labor also has mighty enforcement powers that will give teeth to the new rules.  It may issue investigative subpoenas, conduct audits, and take various other actions that could expose an unwary company to stiff penalties.

These warnings must be accompanied by one other.  The FLSA imposes sometimes onerous record keeping requirements.  Not having in place a system keeping track of employee hours will not just lead to possible fines; it will also open the door for the courts to consider employee testimony and other less exact measures of time worked when calculating damages.  This would result in bigger verdicts against unsuspecting employers.

As for the new rules, there is a wrinkle – and one of constitutional proportion.  Congress makes the laws.  And while Congress may delegate part of its powers to executive agencies in the form of rules-making, it must do so based on specific and intelligible principles.  This means that the broader the delegation, the most constitutionally suspect it becomes.  So it may be little surprise that a change in the more general FLSA exemptions, one too that affects hundreds of thousands of people, was temporarily blocked by a federal judge.  A full hearing will determine whether the DOL went too far – or, in constitutional terms, whether the Separation of Powers that underpins our political system demands that such a change comes from Congress.

The first call of action for businesses remains to make sure they have a genuine general counsel as their attorney, who will be able to keep their company in compliance, represent it before the DOL if needed, and represent it efficiently in court should that become necessary.