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(Over)Time Stands Still: Idaho Employers Ask, 'What Now?'

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Over the Thanksgiving weekend, Amos L. Mazzant III was the most famous judge in America. Beginning his legal career as a law clerk in Dallas, Mazzant rose to become a magistrate and appellate court judge. In 2014, he was appointed a United States District Judge for the Eastern District of Texas by President Barack Obama. Two days before Thanksgiving, Nov. 22, Mazzant issued an injunction against a pending overtime law, stunning economists and spurning Obama's effort to raise take-home pay for millions of Americans.

Newspapers across the U.S. interpreted the injunction with headlines ranging from Mother Jones' "Texas Judge Terminates Obama Overtime Rule with Extreme Prejudice," to Bloomberg's "Trump's Anti-Regulation Era Has Begun."

"I looked at my email that morning and had to rub my eyes. I asked myself, 'Am I actually seeing this?'' said Amy Little, executive director of the Idaho Nonprofit Center.

Little has spent the better part of the past seven months preparing for the change to the Fair Labor Standards Act which, after it passed in 1938, guaranteed time-and-a-half pay for employees who work more than 40 hours per week. The act also exempted some employees with high-level duties and salaries from overtime, placing the burden on employers for distinguishing who is exempt by satisfying three tests: No. 1, the salary basis test, which requires an employee be paid a predetermined salary rather than on an hourly basis, and the amount paid is not adjusted based on whether the person works certain hours; No. 2, the duties test, which requires the employee's job duties must primarily involve executive, administrative and/or professional duties; No. 3, the salary level test—the subject of the proposed change from the Obama administration—which requires an employee be paid at or above a minimum amount.

In 2004, the minimum amount was re-set to $455 per week or $23,660 per year. Then, in April 2016, in one of Obama's most progressive moves, the U.S. Department of Labor finalized a new rule, scheduled to go into effect Dec. 1, which would have raised the salary threshold to $913 per week or $47,476 per year—about double the current threshold.

"The U.S. Department of Labor had estimated the new rule would impact about 20,000 workers in Idaho," said Craig Shaul, research analyst and supervisor at the Idaho Department of Labor. "But everything is on hold now."

He said in anticipation of what was expected to be the rule change on Dec. 1, many Idaho employers had raised some of their employees' salaries to at least $47,476.

"Honestly, I don't see those employers rolling back those increases, mostly because of what a demoralizing effect it would have," said Shaul.

The Boise Metro Chamber of Commerce pushed back hard against the proposed increases. Chamber President Bill Connors argued salary adjustments in New York City or San Francisco may have been "small potatoes, but that's not true for Boise, Buhl or Bonners Ferry." Joining chambers around the U.S., Connors lobbied the Idaho congressional delegation to fight the proposed rule, saying, "small entities can't just turn on a $10,000 revenue spigot. This federal government rule would put small employers in a no-win situation. Do I cut hours, cut staff or tell loyal salaried employees they have to go back to the time clock?"

The National Retail Federation, which estimated as many as 32 percent of the national retail workforce would be converted from salary to hourly pay, argued employers would be operating in a "zero-sum game scenario," saying the change would trigger less workplace flexibility, reduced bonuses and benefits, less career advancement and reduced hours.

"Millions of workers would have been turned into time-card punchers," said David French, senior vice president of government relations and public policy for the NRF.

In the public sector, it was estimated nearly 2,000 Idaho state employees and about a dozen city of Boise employees would have been affected by the change

Ultimately, 21 states (not including Idaho) and a coalition of business groups, led by the U.S. Chamber of Commerce, took the proposed rule to court in the case of State of Nevada et. al v. the U.S. Department of Labor. According to legal experts, challengers took their case to a federal judge in Texas due to the Lone Star State's "fast-track dockets," because it was important to get an injunction before the ruling went into effect—if a favorable ruling had been handed down after the rule became law, it would have been difficult to support.

With only eight days before the overtime rule was to go into effect, Judge Mazzant said, "The Court finds the public interest is best served by an injunction." Mazzant ruled that while the Fair Labor Standards Act gave the DOL ample leeway to establish the types of duties qualifying an employee for an overtime exemption, there was nothing to indicate Congress had granted DOL the authority to define a minimum salary level. Mazzant ruled the DOL "exceeds its delegated authority and ignores Congress' intent by raising the minimum salary level. ... The DOL's rule is to carry out Congress' intent. If Congress intended the salary requirement to supplant the duties test, then Congress, and not the DOL, should make that change."

Not long after turkey and mashed potatoes had become leftovers, the DOL was prepared to defend the proposed change. On Dec. 1, the day the new overtime rule was scheduled to become law, lawyers representing the Obama White House walked into the Fifth U.S. Circuit Court of Appeals in New Orleans and filed a notice of appeal, asking the injunction be overturned.

"The Department strongly disagrees with the decision by [Mazzant]," read a brief DOL statement. "The Department's Overtime Final Rule is the result of a comprehensive, inclusive rule-making process, and we remain confident in the legality of all aspects of the rule."

White House Press Secretary Josh Earnest was more blunt in a statement to reporters, saying some large businesses and Republican governors "had colluded" to disrupt the overtime rule implementation, and "essentially continue to take advantage of more than 4 million of the hardest-working Americans."

Walmart, one of the nation's—and Idaho's—largest private employers, may keep a close eye on the legal actions but probably won't anticipate any significant change, because it recently increased the salaries of its assistant managers and certain other managers from $45,000 to $48,500, ensuring it wouldn't have to pay them time-and-a-half for working more than 40 hours a week, even if the overtime rule had become law. Many large and small employers across the U.S. and in Idaho had also made adjustments to comply with the rule.

"The message from us, is that if you've already implemented those changes, stay the course," said Little. "And for those that procrastinated, well, that may have paid off, but to be clear, it's still the right thing to do to compensate employees for their time."

Little should know. As executive director of the Idaho Nonprofit Center, she takes the pulse of one of Idaho's biggest employment sectors.

"The Idaho nonprofit sector employs over 54,000 people in Idaho," she said. "That's the sixth largest employer in Idaho, and that's a big deal."

Charitable organizations constitute 8.4 percent of all jobs in Idaho and 10.2 percent of private sector jobs, paying $3.9 billion in total aggregate compensation. If ranked as a county economy in terms of employment, charitable nonprofits would rank third, coming only behind Ada and Canyon counties, and their contribution to Idaho's gross state product is 4.1 percent. Nonprofits range from huge employers such as St. Luke's and Saint Alphonsus health systems down to scores of one- or two-person operations.

"A nonprofit is no different than a for-profit business in the way they should conduct themselves," said Erin Hutto, program director at INC.

Hutto spends her days overseeing training for hundreds of the center's members, as well as helping to manage INC's annual statewide conference and the Idaho Gives initiative, a 24-hour nonprofit give-a-thon held each May.

"When we first got word of the pending overtime change, the Idaho Nonprofit Center became the first organization of its kind in the nation to put together training and resources for our colleagues," said Hutto. "We held a series of webinars over the summer and into the fall. As you can guess, participation grew and grew as we got closer to Dec. 1."

Little says there was a flood of questions from Idaho nonprofit employers, but not panic.

"We didn't hear, 'Oh my God, I might go out of business.' Instead, we heard, "What do we need to do to get this right and that doesn't explode my budget?'" she said. "It was a bit like a serious tooth problem. You get increasingly worried about how bad it's going to be but, eventually, you go to the dentist, and it's not as bad as you feared."

Little concedes the biggest concern was raising salaries—in some cases, doubling them.

"Some people's instinct is fight or flight. You can pretend it doesn't exist or you can meet it head on," she said. "We took a proactive approach. We brought in an attorney to discuss the legal ramifications with our nonprofits. We had a human resources professional who really talked them through the reality of it not being as scary as it had seemed."

While INC serves nearly 600 Idaho nonprofit members, it also has employees who would have been directly affected by the overtime change.

"Honestly, it was a little unnerving in the beginning," said Keri Davidson, INC development director. "Erin [Hutto] and I weren't exactly sure how this would impact our own hours, everything from overtime to our vacations. I hadn't clocked in my hours for quite some time."

Hutto explained the emotional effect the ruling would likely have had on many employees.

"I first looked at it as being demoted," she said. "I hadn't been hourly since I was in high school. But I took a step back, and my Dad, who is also in a nonprofit job at a university, said, 'Think about this: You do great work. It's a federally-mandated thing. It's not you.' It finally clicked: If I work overtime, I'll get paid overtime. The last place I lived was England, where they're very strict about not working over 40 hours a week. Our culture has people work and work and work. Yes, it's a change for our culture, and it's a good thing."

Little said it's all about time management, a time-worn cliche but now, a glaring reality.

"We use a software system that integrates with payroll," she said. "So do a lot of Idaho employers now, but it's also an opportunity to update employee handbooks and job descriptions. We're looking at part-timers differently. There's opportunity for flex time or working from home. You've got to have an open-door policy with your staff."

When Judge's Mazzant's injunction and the DOL's appeal to ask that the injunction be overruled Little said her center's best advice for employers is "keep calm."

"We consulted with our attorney and human resources professional for some guidance, and the message from us is: stay the course," she said. "The threshold or criteria might change, but be prepared. It's still the right thing to do."

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