Congress Needs to Clear up FLSA Confusion, SHRM Testifies

Overtime regulations must comply with current workplace needs, House committee is told

By Stephen Miller, CEBS Feb 17, 2017
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​Christine V. Walters, SHRM-SCP

The legal limbo over the Obama-era Department of Labor (DOL) overtime rule, blocked by a nationwide injunction from a district court in Texas last November, must be resolved, witnesses on behalf of the Society for Human Resource Management (SHRM) and other organizations told a congressional subcommittee on Feb. 16. And Congress and the Trump administration also should address long-standing compliance burdens that have bedeviled HR departments and small businesses operating under the current rules, the witnesses advised.

The controversial DOL overtime rule, which doubled the salary threshold for mandatory overtime under the Fair Labor Standards Act (FLSA) from $23,660 to $47,476, remains subject to the district court's temporary injunction that prevented it from taking effect on Dec. 1, 2016, and awaits either further judicial action at the appellate level or new rulemaking by the Trump administration to revoke or revise the regulation.

In the meantime, small businesses in particular—given their limited resources—"face challenges imposed by antiquated wage and hour rules prescribed by the FLSA," said Christine V. Walters, SHRM-SCP, who testified at the hearing on Federal Wage and Hour Policies in the 21st Century Economy before the U.S. House Committee on Education and the Workforce's Subcommittee on Workforce Protections.

Walters, the sole proprietor of FiveL Company, an HR and employment law consulting services firm in Westminster, Md., testified on SHRM's behalf.

A Depression-Era Statute

"The FLSA was enacted toward the end of the Great Depression and reflects the realities of the industrial workplace of the 1930s, not the workplace of the 21st century," Walters said.

'The FLSA reflects the realities of the 1930s, not the workplace of the 21st century.'

"Complying with the statute can create significant legal costs for employers, especially for many small businesses and nonprofits. Improved guidance [from the DOL] would also be helpful in order to prevent baseless lawsuits," she said.

"Information technology and advances in communication have clearly transformed how businesses operate, communicate and make decisions," she continued. "Smartphones, tablets, the use of social media and other technology allow many employees to perform job duties when and where they choose," yet the FLSA overtime regulations assume a world in which work is only done by employees when they clock in at the worksite. As a result, "the FLSA makes it difficult, if not impossible in many instances, for employers to provide workplace flexibility to millions of nonexempt employees."

About the blocked overtime rule, Walters said, "The significance of more than doubling the salary threshold to be exempt from overtime requirements was felt by many employees who currently are properly classified as exempt and resented the prospect of being reclassified as nonexempt." Often, currently exempt employees complained "about how the conversion would impact the flexibility they enjoy today to work a schedule that meets their work/life integration needs, such as coming in late or leaving early to attend to children or family," she noted.

[SHRM members-only toolkit: Determining Overtime Eligibility in the United States]

Federal and State Rules

Subcommittee Chairman Rep. Bradley Byrne, R-Al., asked Walters about the burden that small businesses face in determining whether they have properly classified their workers. She replied, "Getting the initial classification of whether someone is an independent contractor versus an employee is tantamount." She added that employers must comply with IRS guidance and the DOL's administrative interpretations plus, often, state regulations. "I hail from Maryland [and] our Department of Labor, Licensing and Regulation uses its own classification test," she said.

Next comes the determination of exempt or nonexempt status. "We have at least 14 states today, I believe, that have their own white-collar [exemption] regulations," Walters pointed out. "So you have to do federal as well as state analyses, and hopefully if you get that right, then there are myriad challenges under the FLSA to compliance with regard to travel time, idle time, training time," etc., as well as, increasingly, state laws on paid time off, she explained.

[SHRM members-only toolkit: Calculating Overtime Pay in the United States]

Burdens on Academia

Andy Brantley, president and CEO of the College and University Professional Association for Human Resources in Knoxville, Tenn., was among other witnesses testifying at the hearing.

"The current salary threshold is overdue for a much-needed increase," he said, "but more than doubling the threshold, as was proposed by President Obama's Department of Labor, would have had a tremendous negative impact on employees and employers across the country."

Brantley expressed concerns about the required reclassification to nonexempt status of "professionals in thousands of academic positions that clearly met the duties test for exemption but are paid less than $47,476—positions that require bachelor's and master's degrees" such as academic advisors and mental health counselors, particularly at smaller colleges and in more rural parts of the country.

The blocked overtime rule provides an opportunity for future rulemaking or legislative action to address these and other FLSA compliance concerns, the witnesses observed.

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