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Federal judge halts overtime regulation in major victory for hospitality industry

Wednesday, November 23, 2016   (0 Comments)
Posted by: Katie Montgomery
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In a major legal victory announced in the 11th hour, the Eastern District Court of Texas granted an emergency injunction on the Department of Labor’s overtime regulation. The preliminary injunction prohibits the new overtime rules from going into effect on December 1st.  

It is expected that the Department of Labor will appeal this decision, but while that is being heard, the new regulations are prohibited and cannot go into effect.

The court said that the plaintiffs, in this case, filed by 21 state attorneys general including Alan Wilson of SC, “demonstrated a substantial likelihood of success” on their case’s merits regarding the unlawfulness of the DOL’s final rule. The court’s action stops the rule nationwide.

The American Hotel and Lodging Association joined forces with more than 50 other national and state associations to file a similar lawsuit against the DOL and its overtime regulation. The National Restaurant Association also worked to encourage Congress to make changes to the rule.

The hospitality industry argued the rule is too much, too soon and it will have a far-reaching negative impact on the millions of workers in our nation’s restaurants and hotels.

These new regulations would have, among other things, increased the salary requirement for supervisors and managers from $455 per week up to $913 per week. Such a change would have had a disproportionate impact on jobs in the hospitality industry.  

While this is a positive step forward, this decision does not delay the overtime rule indefinitely. Additional legal actions or a final decision by the Court in favor of the DOL could result in the overtime rule taking effect. Therefore, the SCRLA once again reminds our members that it is important to continue to take the necessary steps to be ready to comply.

According to attorney T. Chase Samples with Jackson Lewis P.C. in Greenville, the real challenge with this ruling is how to deal with it from a business perspective and an employee relations perspective. Many employers have planned ahead for this regulatory change and have already notified employees of changes in pay. It is going to be difficult from an employee relations’ perspective to un-ring the bell, especially for those that were expecting a pay raise.

On the other hand, the message will be more readily received by those salaried employees who were being converted to hourly. Some employers may have already begun paying employees under the anticipated pay system and for those employers, rescinding pay raises poses particular challenges.

In addition, many employers discovered through this process that some of their salaried employees did not actually satisfy the duties test and had been misclassified.  This was a great time to fix those mis-classification problems and convert those employees to non-exempt status.  
What should you do?
First, companies must decide whether to keep the planned pay changes or continue paying employees as they were paid prior to the new regulations.
Second, if a company is making changes, they should consider whether employees have already been advised of pending changes based on the new regulations. If employees have not yet been notified, then there’s nothing more to do. Employers can continue current pay practices.
Third, if employees have been notified of the anticipated pay changes, then an employer has some difficult decisions to make about whether and how to communicate this latest legal development to employees. In doing so, employers must be careful to comply with state wage payment and notice laws. In South Carolina, this means providing employees at least 7 days advance notice of any changes in pay, other than pay raises.

The SCRLA will keep you updated in the days ahead as the next phase of court action moves forward and conversations continue in Congress and with the new Administration to the address this issue.

Information for this article provided by the American Hotel and Lodging Association, National Restaurant Association and Jackson Lewis P.C.

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