The new overtime-exemption rule will still go into effect at the beginning of next month, but many wonder what will happen to the rule under a Donald Trump presidency.
REPORT FROM THE U.S.—The U.S. Department of Labor’s new overtime-exemption rule faces an uncertain future under the administration of President-elect Donald Trump.
But any changes that may occur after Trump takes office have no bearing on the deadline for companies to comply with the rule, which sets an annual salary threshold of $47,476 for employees to be exempt from overtime pay. That deadline is still 1 December, and hoteliers shouldn’t forget it, sources said.
What could happen
There are other scenarios in which the overtime rule might be changed or delayed, but none are sure things.
A Texas court currently is weighing consolidated lawsuits against the rule, but Andria Ryan, partner at law firm Fisher & Phillips, said it’s not like the judge can decide the whole case in one hearing. And if the U.S. House of Representatives or Senate, emboldened by the results of the presidential election, try to push forward any bill at this point, President Barack Obama won’t sign it, she said.
Trump promised during his campaign to roll back the regulations, she said, and there is precedent. President Ronald Reagan issued executive orders that effectively rolled back a number of regulations that came about during the Carter administration. An executive order could call for further study, which would delay the rule from going into effect.
It’s likely Trump will seek to keep his campaign promises of rolling back this and other regulations he disagrees with, Ryan said, but no one can be sure what he’ll do or when.
Until then, employers must properly treat employees as exempt or nonexempt. It’s better to reverse course later in the event that regulations are rolled back, she said, than to be found in noncompliance. In that case, newly nonexempt employees might even welcome being returned to exempt status.
And it’s possible to change an at-will employee’s pay back to a previous level.
“From a morale standpoint, I think an employer will have to decide carefully if they want to do that,” she said.
Ryan advised that employers should be cautious about employee relations, and communicate with them. When speaking about the new rule, employers should explain that changes are anticipated under the Trump administration, and assure employees that they will be kept apprised of the situation as it evolves.
The American Hotel & Lodging Association is working with legislators in Washington D.C. who agree that the new overtime rule raises the salary threshold too high and too fast, Vanessa Sinders, the organization’s SVP and head of government affairs, said by email. One argument is that three out of every five American hotels are considered small businesses.
“We are also reaching out to the president-elect’s transition team to advocate for the incoming administration’s support to find common-sense solutions that will afford businesses more time to implement such sweeping changes,” she said. “In the meantime, we continue to provide our members with tools and resources about the impending 1 December implementation to help them take the necessary steps now to ensure compliance.”
How hoteliers are preparing
Christine Andrews, VP of human resources at Hostmark Hospitality Group, said her company is in the process of finalizing changes to the last couple of hotels that it manages.
That process includes identifying which employees to give pay raises to meet the new salary threshold and transitioning others to nonexempt status and explaining the changes to them. When talking with employees, she said, managers are explaining to the newly nonexempt that they are still valued and important members of their team.
“It’s too hard with the uncertainties to say anything different other than this is what we know,” she said. “The new rule goes into effect 1 December. If that changes at a future time, we can plan appropriately.”
The company has already sent off 2017 budgets to owners for approval, she said. For morale reasons, she said, salaries won’t change if there’s a delay or reversal of the rules.
One of the expected challenges for newly nonexempt employees, Andrews said, will be remembering not to take their work home. They’re used to checking emails, getting phone calls and sometimes handling operations issues at home, which becomes compensable, she said.
“We’ll be removing work emails from people’s personal devices,” she said. “We don’t want them tempted to be looking at email when they’re at home and not working.”
In preparation for the new rule, Strand Hospitality Services reviewed each of its properties, said CFO John Johnson. Not only did the company look at employees’ pay, but it also looked at their responsibilities, he said. Generally, the only two positions in need of exempt status are the GM and director of sales, he said. There were other positions in gray areas related to the duties test, he said, so the company moved them to nonexempt status.
“If the department of labor came to investigate, would they qualify as exempt or not?” he said. “We removed that gray area to make sure they pass the test for responsibilities.”
If the rule were to change or be delayed, the only positions the company would consider moving back to exempt status would be assistant GMs or sales managers at larger properties, Johnson said.
“Trump hasn’t specifically talked about what his ultimate plan is going to be with it,” he said. “We’re under the impression, and our labor attorneys are under the impression, that at least for the time being, for the next year or so, we will be under the rule. It may get then reversed or changed, but we think it may be here to stay to some degree, at least for the short term.”