Obama-era overtime rule is struck down, but the issue isn't dead

The previous increase stressed small businesses, but a smaller increase may be in the cards.

In early September, the U.S. Department of Labor officially struck down an overtime rule increasing the salary threshold for employees earning less than $47,476 per year. If employees failed to meet the previously proposed new cap, which was double the previous threshold of $23,660, they would be eligible for overtime pay under the Fair Labor Standards Act. The overtime rule met a somewhat ambiguous end in March of this year only to enter into a protracted appeals process, but what can hotel operators do to ensure they are obeying the law now?

According to Dana Kravetz, managing partner at Michelman & Robinson, in the short-term hoteliers can revert to processing payroll in the way they used to before the Obama-era overtime rule was put in place. However, the issue hasn’t fully gone away. Kravetz expects the Department of Labor will revisit the salary cap under the Trump administration, and while he called a doubling of the cap unreasonable in the eyes of employers, the previous $23,660 cap was set in 2004 and may need to be updated in some way.

“Employers should still be prepared for a change, because it will come,” Kravetz said. “The reality is that the Obama administration went too far, aimed too high and stressed small businesses. Softening that number is a good approach, but hoteliers should be prepared.”

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Another concern, Kravetz said, is the manner in which overtime exemption is determined. Strictly speaking, in many cases overtime is not determined by pay levels, but by title and what management duties look like.

The DOL defines administrative-level employees as those who “customarily and regularly direct the work of at least two or more other full-time employees or their equivalent.” This means any “administrative” employee spending most of his or her day not in management roles does not meet the exemption, such as an assistant manager not actually managing anyone.

“At this point, businesses should have all their employees examined as they relate to all areas of exemption,” Kravetz said. “No one can relax on their diligence there because these definitions are as relevant as ever. In fact, their importance is heightened.”

Kravetz said he expects the Trump administration and the DOL to send numbers back and forth for some time before ultimately deciding on a new overtime exemption cap, but he fully expects a new one to come about. He also cautions employers about becoming overzealous on this issue if they want to maintain employee morale, and should a new cap appear employers will have to work with their employees as they undertake the process.

“Some employees like the idea of being salaried, they think it reflects success, and that can be a morale issue,” Kravetz said. “You can also expect to see some pushback from exempt employees who have grown comfortable being nonexempt.”

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