Publications
First: Despite the Political Uncertainties,
It’s Time for An Overtime Audit
We summarized the new overtime regulations for our readers when they were first published, in our April 2004 Special Alert. The regulations officially went into effect on August 23, and we urge you to take another look at that article now – it highlights the most significant changes in the law, and provides a “what you should do now” checklist.
But as valuable as these kinds of articles (and the mountain of commentary, analysis, and seminar offerings that have recently appeared) may be, they will only take you so far. The new regulations are lengthy and subject to much interpretation, and while the plethora of published materials on the regulations – including our
To really minimize overtime violations, which can be hideously expensive, you need to get down to specifics. The only way you can do that is through a process by which the particulars of the regulations are matched up to the particulars of a specific company.
In this regard, the overtime regulations are no different than any other set of complex regulations. For example, most business executives understand that OSHA compliance requires much more than reading articles and attending seminars – they know that in order to minimize OSHA problems, someone with sufficient expertise must painstakingly review what regulations apply most directly to a specific business; they must then review actual practices to determine if there are any existing or potential compliance shortfalls; and they must then design businesslike solutions that work within the structure of the business being addressed. The same thing happens in a Sarbanes-Oxley review, or an affirmative action analysis, or in a host of other regulatory settings.
In respect to the new (and, for that matter, prior but still in effect) regulations, the task is to determine what regulations apply, where the potential trouble spots are, and what the best solutions and “work-arounds” may be. In some companies, that may mean adjusting compensation levels to take advantage of the new “floor” and “ceiling provisions.” In others, it may mean adjusting and re-defining job requirements. In others, it may require policy revisions and management training.
We refer to this process as an “overtime audit,” and we are in the process of working through these procedures with our clients.
Most of the companies engaged in this analysis are finding that if they were in compliance previously, there is usually no need for significant changes now, but at that same time, many companies find that there are substantial opportunities to re-classify certain employees from non-exempt to exempt. Sears, for instance, just announced that it reclassified 2500 entry level positions, and although analysts disagree, some predict that millions of workers throughout the country will lose the right to overtime pay.
There is another benefit to a legal audit as well: in many instances, companies find, to their surprise, that they have not been in compliance for many years, and the process presents an opportunity for a fresh start. This is especially true for companies located in states that have their own overtime laws, which layer on top of the federal regulations.
Do not underestimate the importance of the exercise – with the new regulations will come new enforcement efforts, both in the Department of Labor and among plaintiffs’ attorneys. Overtime compliance is now a hot topic.
But there is (as there always seems to be) a proviso. On September 9, the House voted to defeat a spending bill which would effectively block the new regulations. Twenty-two Republicans joined in that vote. President Bush has vowed to veto that bill if it passes the Senate, and negotiations with the Bush administration are underway. Previously, both the Senate (in May) and (unexpectedly) the House (in mid-July) passed a bill which, among other things, seeks to change the new provisions to the extent they make employees over a certain salary level automatically exempt. There are some differences between these two bills, but efforts are underway to reconcile them. A prominent Republican, Senator Specter, has parted ways with the administration on this issue. “The bill is in conference committee, and we will be fighting to ensure that it becomes law and to protect the overtime rights of the workers who need them to survive,” said Specter. “And we will win that fight.”
And if Senator Kerry is elected, the entire process may go back to the starting blocks.
Nevertheless, the current regulations are the law, and you must deal with them. Even if those regulations are changed in the future, a present overtime audit is anything but wasted effort. An overtime audit will reveal your current overtime “base line” – what your pay practices are among different types and classifications of employees – and that will give you the ability to get current, and to then quickly implement whatever future “tweaks” are required, without starting from scratch, as this political battle plays out.
One last note… Once the audit is done, always remember that there are right ways and wrong ways to implement the required changes. For instance, employers need to be concerned about how transferring employees from non-exempt to exempt status will affect morale. In addition, depending on how the changes are packaged and presented, employees might be encouraged to seek compensation for those periods during which they were wrongly classified.
Counsel Consulting Group LLC helps companies throughout the United States avoid employment and HR-related claims and liabilities. CCG assesses existing policies, procedures and problem areas; it provides customized liability-avoidance training to managers and executives; and it designs and implements business techniques that reduce employment liability risks on a long term basis. CCG also offers specialized workshops for managers and HR executives, customized consulting in focused employment-related areas, and CD-ROM and web-based training alternatives. For more information, contact us at info@powelltrachtman.com and visit our website at www.counselconsulting.com.
Powell Trachtman Logan Carrle & Lombardo PC. is a full service law firm with offices in suburban Philadelphia, PA, Harrisburg, PA and Cherry Hill, NJ. Powell Trachtman represents a variety of commercial enterprises, entrepreneurs and business executives in respect to their litigation, litigation avoidance planning, business formation, business transactions, estate and tax planning, and other needs. We are also approved defense counsel for numerous insurance carriers in matters pertaining to professional malpractice, products liability, employment practices, directors and officers liability, and many other fields. For more information, contact us at info@powelltrachtman.com and visit our website at www.powelltrachtman.com.
Various insurance carriers have approved Powell Trachtman as counsel for the defense of employment practices claims, directors and officers liability claims, and other claims litigated in Pennsylvania and New Jersey. If a claim is brought against you, please feel free to contact us for further information.
