The ruling by a federal district court judge in Texas that placed an injunction on the Department of Labor’s (DOL’s ) overtime rule revision, halting it from taking effect on Dec. 1, has created confusion about what might come next. While the new rule isn’t quite dead, the injunction casts doubt on whether the overtime revisions will go forward.
Some employers now plan to defer reclassifying employees as nonexempt and thus entitled to overtime pay—particularly with regard to mid-level managers in the retail and service industries whose pay falls between the current salary threshold of $23,660 and the revised rule’s threshold of $47,476.
But whether such managers are reclassified or not “doesn’t address why they are working overtime hours in the first place,” said Joshua Ostrega, chief operating officer and co-founder of WorkJam, which offers a workforce management platform for the service industry.
“Many businesses support, to some degree, making changes to alleviate overtime hours worked by managers, whether they are exempt or nonexempt,” he noted, citing a July WorkJam survey of 250 U.S. retailers with at least 5,000 employees that showed:
- 70 percent of managers were working overtime.
- Of those, 40 percent were working between 4 to 6 hours of overtime per week.
All in all, “That’s a significant amount of overtime that’s happening from the managers’ side,” Ostrega said. Before the revised overtime rule was halted, “you were looking at a situation where that was going to be extremely challenging for many businesses,” which led to “sometimes knee-jerk reactions to deal with it”—such as hiring temps and part-time workers to reduce the hours worked by newly nonexempt full-time employees.
The halt in the overtime rule changes “is probably a relief for a large number of employers,” he said. But while “no one really knows where this is going,” there’s a consensus that the overtime threshold will eventually be increased, even if not as fast, or by as much, as the DOL rule changes would have put in place.
At the same time, “state governments are increasingly pressuring businesses to curb unfair shift practices, such as on-call scheduling and last-minute assignments,” Ostrega noted.
“This might be a bit of a break, short term. But long term, companies need to take a hard look at the business, including their scheduling practices and the consequences of requiring managers to work long hours beyond the standard workday,” he said. Questions employers should be asking include why these people are working so much overtime in the first place and what might help them complete their jobs during the time they’re supposed to be working.
Improved Scheduling Practices
Inefficient scheduling practices result in needless overtime pay, Ostrega believes. And there’s an irony: Managers, in retail and other service industries, “are frequently putting in additional hours to compile upcoming shift schedules for employees who report to them,” a task that’s often done in the evenings or later at night, he noted.
“If the scheduling managers are themselves nonexempt, that can in itself increase the amount of overtime hours for which the business must pay,” he pointed out.
But even when scheduling managers are exempt and therefore not costing the business additional money when they work extra hours on administrative tasks—and will be kept that way now that the rule changes have been halted—”at the end of the day, it’s not a long-term strategy to have managers working tons of overtime for the same pay” if employers want to keep them engaged and not looking for employment elsewhere.
Figuring out schedules is complicated because “you have to determine not only who you want onboard, but who is available, whether they have the right skills and if they are being paired with the right people,” Ostrega said. On top of that, schedules can become “stale” as soon as they are posted, as employees discover that family and other needs prevent them from working extended hours. Employees then contact the scheduling manager with personal requests through e-mail and voice mail, requiring managers to adjust schedules, which takes even more time.
Businesses don’t want to be overstaffed, but “if they’re understaffed, who do you think goes and works if no one else can? Usually the manager. There are inefficiencies in that whole process.”
Even if this revised rule never sees the light of day, “it’s very likely that there’s something else around the corner,” Ostrega said. ”
These issues can be addressed, to a large extent, through automated scheduling systems that allow managers to post available shift times and let employees sign up for shifts and to request different shifts. And that interactive technology is steadily improving.
The revised overtime rule, concluded Ostrega, “may not have been the right regulation—that’s debatable—but it definitely created the conversation around the challenges that both the employer and employees face in the overtime area.”