The fate of the overtime expansion
The fate of the overtime expansion
19 JANUARY 2017 8:12 AM

What might employers expect next in the wake of an injunction, a Republican-controlled Congress and a new president?

Last November, several graduating hospitality administration students cheerfully announced to me they had been offered entry-level hotel management positions. Their starting salaries came as no surprise: Around $47,476, the proposed new threshold of overtime-exempt employees under the new regulations governing the exemption of executive, administrative and professional employees from the minimum wage and overtime pay protections of the Fair Labor Standards Act.

The timing of the offers and the students’ acceptances could not have been better, as a monumental shift took place on 22 November 2016.

By now, you likely know, that’s when U.S. District Court Judge Amos Mazzant granted an Emergency Motion for Preliminary Injunction and thereby enjoined the Department of Labor from implementing and enforcing the Overtime Final Rule on 1 December 2016. That same day, the Department of Justice on behalf of the Department of Labor filed a notice to appeal the preliminary injunction to the U.S. Circuit Court of Appeals for the Fifth Circuit. It has been reported that the Fifth Circuit said it will schedule oral argument in the case for the first available sitting after the close of briefing, at the end of January.

There is enough uncertainty in business, without on-and-off regulations affecting a critical cost center. What might we expect in the in the wake of this injunction, a Republican-controlled Congress and a new president? At the risk of creating “prognostication fatigue” for our readers, I’ll share what I consider are keen insights from Bryan Jacoutot, a legal journalism colleague and an attorney with the Atlanta law firm Taylor English Duma LLP.

“The fate of the overtime expansion underwent a monumental shift in about a two-week period,” Jacoutot noted. “Between the election of Donald Trump and the continuation of a Republican-controlled Congress on November 8, and an injunction on November 23, the expansion went from being a foregone conclusion to, very possibly, dead in the water.”

Here’s what Jacoutot thinks could be next for employers, using a “three-legged stool” analogy.

Leg 1: Congress
Since the regulation was initially proposed, the Republican-controlled Congress has made no secret of the fact it desired to end it. From their perspective, the onerous financial burden caused by the regulation would lead businesses, especially small businesses, to cut jobs rather than absorb the cost of paying overtime. There was an added concern once the rule was slated for implementation on 1 December that most companies simply would lack the knowledge or capacity to comply. Accordingly, the House of Representatives passed a bill to delay implementation of the regulation by six months, giving business owners more time to comply.

The Senate passed a similar measure. The Obama administration, however, was not going to sign the bill so it was thought the congressional measures would be brushed aside. There simply were not enough votes to overcome a veto by the president.

With the election of Donald Trump, however, Congress found a potential ally in the next White House administration. Indeed, provided none of the other two legs of the stool takes down the regulation first, it appears likely that Congress will propose to kill the regulation entirely since a veto from the president is no longer anticipated.

Leg 2: The Lawsuit
The federal lawsuit filed by 21 states and numerous business organizations, which led to the initial injunction stalling the overtime expansion, still must play out. While the granting of an injunction should not be taken as a reliable indicator of a claim’s ultimate success, the strength of the party’s claims requesting an injunction is one factor a judge considers before granting it.

The lawsuit raises several compelling arguments revolving around whether the Department of Labor has the authority to implement such a dramatic change to the overtime salary level without the consent of Congress. The relative merits of the lawsuit notwithstanding, the case has already gone a long way in ending any hopes of implementing the regulation by delaying it beyond the term of President Obama. Indeed, even if the Department of Labor prevails, the two other legs of the stool represent significant threats to the regulation due, in large part, to the election of Donald Trump.

Leg 3: President-elect Trump
Leg 1 addressed briefly how Trump can prove detrimental to the regulation merely by not getting in the way of Congress’ attempts to end it. That said, he can also play a more direct role in its demise.

With control of the presidency comes control of the Department of Labor, an agency helmed by a presidential appointee. During the campaign, Trump spoke on several occasions of his desire to roll back economic regulations. Dealing a knockout blow to the overtime expansion by instructing his Department of Labor to scrap implementation would be one way he could immediately show he was serious about the promises he made on the campaign trail.

The caveat here, of course, is that it’s difficult to determine precisely how Trump will behave once he assumes office. He has been inconsistent on several policy positions during the campaign. So, the question becomes, which Trump is showing up to govern? That’s an answer not many of us have at this point.

What advice does Jacoutot offer?

“Be honest and upfront with your employees about the obstacles you’re facing, and the fact that it is largely out of your hands,” Jacoutot said. “Unless you’re prepared to absorb a fair amount of cost, or have already started down that road, refrain from making concrete statements or allocating too many resources toward compliance until the likely outcome of the regulation becomes clearer. As we make our way through early 2017, that clarity should become more apparent.”

Barry Shuster, JD, MBA, MS, CHE, CHIA is interim chair of the Hospitality & Tourism Administration program at North Carolina Central University School of Business, and a visiting associate professor of business and hospitality law and hospitality finance and cost control.

The opinions expressed in this column do not necessarily reflect the opinions of Hotel News Now or its parent company, STR and its affiliated companies. Columnists published on this site are given the freedom to express views that may be controversial, but our goal is to provoke thought and constructive discussion within our reader community. Please feel free to comment or contact an editor with any questions or concerns.

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