With the December deadline rapidly approaching, a coalition of 21 states has sued the Federal Government, hoping to block President Obama’s recent legislation regarding the Overtime Law.
Under the new regulation, employers are required to pay their salaried employees $913 a week or, more than $47,000 a year. Since the regulation’s unveil this spring, employers have been forced into a bind. While they have several options to consider, the outcomes hinder the productivity of the company and present unique challenges.
One way an employer can satisfy the law is to increase the salaries of their workers who fall below the threshold and who consistently work more than 40 hours a week. A percentage of these employees could receive a significant increase in pay.
Additionally, an employer could decrease the amount of time an employee works a week, limiting those hours to 40 or fewer.
A third option for an employer is to allow the employee to continue working his or her regular hours at his regular salary. In this option, however, the employer must pay the employee overtime for all hours worked over 40.
In all options, the employer is asked to make significant amendments to their policies and their productivity. While searching for the best option, the employer faces several obstacles. Do they hire additional work staff to make up for the lost productivity? Do they increase the price of their services or products? Will they be forced to tighten salaries across the board to accommodate this shift?
The State’s Fight Back
The answers stated above aren’t easy ones to solve. They also pose serious risks to employers in other areas. For example, under the new law, employers may be more likely to hire part-time employees, thus preventing individuals from partaking in health care, time-off, and retirement benefits.
In the lawsuit presented last week, the states argued that the law poses a significant risk on their budgets. Additionally, the new law forces the states to adopt the federal policies that strip the rights from the states, especially in regards to the automatic salary increase that will occur every three years.
“It’s not the particular increase this time but the fact that every few years, without any further rulemaking, the salary level can change,” said Jesse Panuccio, quoted in this Forbes article. Panuccio, a partner with Foley & Lardner in Miami and former general counsel to Fla. Gov. Rick Scott is not alone in this perception.
Citing the 10th amendment, the States hope to challenge and block the plan.
The States included in the recent suing include: Nevada, Alabama, Arizona, Arkansas, Georgia, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Michigan, Mississippi, Nebraska, New Mexico, Ohio, Oklahoma, South Carolina, Texas, Utah and Wisconsin.
Perhaps what makes the process even more challenging is the looming December deadline. It’s not uncommon for corporations to spend a year crafting a new compensation strategy. With the overtime law, companies are faced with a much tighter turnaround schedule. How the Overtime Law will affect our companies and our economy is yet to be determined. One thing is certain: the months leading up to the regulation’s due date will be a whirlwind of change and excitement.