By Kate McGovern Tornone

The Society for Human Resource Management (SHRM) has announced that it backs legislation that would prohibit the U.S. Department of Labor (DOL) from enforcing its new overtime regulations.

DOL announced the final rule on May 17; it will more than double the salary threshold for the salary basis test overtime exemption. Effective December 1, 2016, employees must receive overtime unless they are paid at least $913 per week (which translates to $47,476 annually). The current threshold is $455 per week (or $23,660 annually). The rule also includes automatic increases to the threshold.

SHRM, the world’s largest HR professional society, agrees that the salary threshold is due for an increase. But the new regulation goes “too far, too fast,” said the organization’s vice president for government affairs, Mike P. Aitken.

Options for vacating the rule

Lawmakers introduced the “Protecting Workplace Advancement and Opportunity Act” (H.R. 4773, S.B. 2707) March 17. If passed, the bill would essentially void the DOL’s new overtime rule.

The bill also would allow DOL to proceed with similar rules only after it reconsiders its economic analysis of the rule’s potential impact. DOL would be required to provide at least 120 days for notice and comment and 1 year before final rules could take effect. The rules could not contain any automatic updates to the salary threshold.

The House and Senate versions of the bill were introduced by Representative Tim Walberg (R-Mich.) and Senator Tim Scott (R-S.C.) and have 155 and 36 cosponsors, respectively.

SHRM supports the legislation and, according to Aitken, is working with lawmakers to get it passed. He acknowledged that President Obama likely would not sign the bill but said that if it received bipartisan support, it could "put the administration in a bit of a box."

Aitken also pointed to other options for halting the rule.

One is the Congressional Review Act (CRA) which, according to the Congressional Research Service, permits Congress to enact a joint resolution that would void the rule and prohibit DOL from issuing substantially similar rules without subsequent statutory authorization. The president, however, could then veto that resolution, allowing the regulations to take effect.

Congress has successfully employed that law’s provisions once, Aitken said. It’s a “heavy-handed” approach that “Congress only uses in extreme circumstances,” he explained. Because a president is unlikely to overturn his own agency’s regulation, the CRA is primarily relevant during elections, according to a Harvard Law Review article.

In 2000, the Occupational Safety and Health Administration (OSHA) issued regulations on workplace ergonomics. The rule came out in the last days of the Clinton administration and Congress used the CRA to overturn it once George W. Bush was in office.

Alternatively, Congress could put a rider on an appropriations bill that could defund the agency from either enforcing or implementing the rules, Aitken said.

In addition to these legislative approaches, stakeholders have discussed the option of challenging the rule in court, Aitken noted.

SHRM supported a smaller increase

SHRM has said that it would support a smaller increase in the threshold. The new rule sets the threshold at the 40th percentile of full-time salaried workers in the lowest income region in the country.

Instead, SHRM would have supported a change more consistent with the seven previous increases. DOL always has tied the threshold to an amount in the 10th to 20th percentile range, and Aitken said that SHRM backed the most recent increase in 2004. Jumping to the 40th percentile, however, is a significant departure from previous changes, he said.

Aitken also took issue with the rule’s automatic increase. The threshold will be updated every 3 years to keep pace with the 40th percentile mark. The first planned increase, set for January 1, 2020, will increase the threshold to more than $51,000. The updates will occur irrespective of the country’s economic condition, Aitken noted, and there will be no opportunity for stakeholders to submit comments. “It just automatically goes into effect,” he said.

Employers' next steps

While employers have several ways they can handle the changes, Aitken says he expects most will adopt a rigid overtime policy in an attempt to control costs. “They’re going to end up being more vigilant about when someone is working,” he said.

SHRM’s president and CEO, Henry G. Jackson, echoed that position in a prepared statement. “There likely will be fewer opportunities for overtime pay as employers are forced to restructure their compensation and staffing,” he said.

SHRM is not recommending one specific course of action but Aitken said that “we would encourage organizations to make the decision that works best for their organization and employees in order to meet their objectives.”

“There are going to be some positions in some organizations that get reclassified where it’s crucial that that person works overtime,” he said. “Employers have to plan accordingly.”

Aitken noted that SHRM is grateful DOL gave employers up to 6 months to comply with the new rule. “Employers are going to have to carefully look at this, make changes and have strategic conversations.”

He added a warning for employers that may be considering increasing salaries across a class of jobs above the new threshold. “In this instance, with the automatic increase, you’ll be chasing that [number] every time.” With the first automatic updated projected above $51,000, that could increase costs drastically and quickly. “So employers have to make that kind of strategic decision,” he said.

Employers also will have to decide how to handle any adverse implications for benefits programs, workplace flexibility and employee morale, Aitken said. “I think we know some of the problems that this is going to cause and I think we’re going to discover others as it’s implemented.”