OT Regulatory burdens shift to states

February 23, 2017

Overtime, minimum wage regulatory burdens shifting from Washington, D.C. to the states.

Read about what is affecting the employee benefits outlook for 2016.

Government regulation in the areas of overtime pay and minimum wage will certainly see some changes as a new administration settles in at the White House. But unlike the last eight years, additional regulatory action is more likely to come from states and city governments, rather than from federal regulators.

President Trump’s pro-business, anti-regulation priorities are likely to clash with the priorities of the previous administration, which was seen as having a more consumer- and worker-focused, approach. Federal initiatives to increase the minimum wage for some workers or update regulations on overtime pay may be changed or cancelled altogether.

At the same time, states and communities have been going their own way, experimenting with minimum wage laws and other workforce regulations. Employers face a complicated and changing landscape; keeping up to date will be on ongoing challenge, especially for employers with workers in different locations.

Wage and hour regulations: a top area of litigation
Department of Labor (DOL) statistics show that wage and hour cases are now the No. 1 category of class action lawsuits brought against employers, replacing discrimination cases. In addition, DOL estimated that in 2011 more than 70 percent of employers were out of compliance with Fair labor Standards Act (FSLA) wage and hour rules.

“That’s where we’re seeing all the action,” said Sarah Crippen, a business law attorney with Best and Flanagan law office. She noted that FLSA was first written in 1938 and efforts to update it have been incomplete. “It’s like a really old house that has had additions and remodels—and it’s pretty unwieldy,” she said. “Implementing it is difficult; there’s a lot that could be done to improve it. We’ll see if Trump and Congress can do something.”

Updated overtime rules—an Obama priority
The Obama Administration made a big push to change the regulations regarding overtime pay—setting a higher top threshold for the salary necessary to qualify for overtime pay.  The threshold was set to rise from an annual salary of $23,660 to $47,476 (that's from $455 to $913 a week). Employees earning above that amount, along with managers, would be exempt.

Legal challenges and an expected lack of support from the Trump administration may mean that the rule is never put in place—but many national employers had already changed payment policies to conform to the new standards.

For other employers, issues still abound—for example, in an age where many workers do some work from home, what counts as work time? And exemptions for executives, professionals, and administrative workers are written into the law, but how those titles apply to specific roles can be murky. At this point, experts are advising employers to review their policy on management exemptions and make their best effort to be in compliance with the regulations.

Minimum wage—state and local governments are active
The Obama Administration raised the federal minimum wage to $10.20 per hour for federal contractors. This came at a time when many low-wage workers have been clamoring for better pay, and a number of states and communities have increased minimum wages paid in their jurisdictions. Twenty-one states have scheduled increases to their minimum wage for 2017.

In Minnesota, lawmakers have raised the minimum wage above the federal standard, which is $7.25 per hour (last changed in 2009). For small businesses in this state, the minimum wage for employees is $7.75 per hour; it’s $9.50 per hour for workers at larger companies (defined as businesses with annual gross sales of $500,000 or more). The Minnesota minimum wage will be indexed to inflation beginning on Jan. 1, 2018.

On the national level, the Trump Administration, and the Republican-led Congress, are much more likely to allow businesses to set their own wages, without mandates from Washington, D.C.