The Department of Labor is working to put regulatory changes in place before the 2020 election. At the same time, state and local employment laws passed in the absence of preemptive federal laws create a patchwork of compliance requirements for employers with a presence in multiple states.
According to the findings of a report released last spring by Littler Mendelson, employers are especially watching localized regulations around paid sick leave, marijuana and background checks. At the federal level, they appear to be commonly watching for an expected change in the Department of Labor’s overtime exemption regulations.
Each year the firm surveys employers to find out what legal and regulatory issues are at the top of their minds. This year’s survey collected data from 1,331 professionals at companies in a variety of sizes, ranging from fewer than 100 to more than 1,000.
Littler Mendelson shareholder Michael Lotito said when multi-state employers have a variety of different state and local employment laws they’re subject to, they tend to prefer having company-wide policies that comply with the strictest of the laws they have to follow, instead of having different policies for each place they do business in.
“This way you can train off of a single policy. You can hold people accountable for that single policy. … You don’t have to worry if you transfer somebody from State A to State B and now suddenly there’s a different law.”
California is one exception, Lotito said, given the state’s penchant for employment laws that are unusually strict for employers.
If a company does business in California but the state doesn’t account for the majority of its operations or revenue, a company may not adopt “all the nuance and progressivism of California” across all its locations. It may carve out California and have separate policies and training for employees there, he said.
“California is really a separate country,” he said, pointing to the San Francisco Bay Area’s multitude of minimum wage laws as an example. “So a [technician] going from place to place … could be in four different jurisdictions in a single day servicing customers with four different minimum wages. … So [companies] are kind of forced to go to that higher number.”
One part of the survey gauged what employers are doing to comply with shifts in rules and enforcement by federal agencies, such as the National Labor Relations Board and Equal Employment Opportunity Commission.
According to Littler Mendelson’s survey, employers are most watching an expected finalization of a proposed rule change to the DOL’s overtime exemption regulations.
In March the DOL proposed raising the “white collar” overtime exemption threshold from $23,600 per year to $35,308 per year. Overtime-exempt employees also have to have job duties considered executive, administrative, professional or outside sales.
The proposed new threshold is a compromise with a proposal by former President Barack Obama’s administration of $47,476. In 2016, a federal judge in the Eastern District of Texas permanently blocked the rule. For disclosure purposes, Lotito mentioned Littler Mendelson played a role in obtaining the injunction.
“Those issues are extremely important not only for the financial implications, but if you have to decide that you’re going to re-classify [employees], that has a lot of residual issues,” Lotito said, that include supervisor training, paperwork and payroll. “Washington sits and says, let’s change the overtime rate … but these concepts get implemented on the ground, and the implementation take a lot of effort … and a lot of thought.”
The employer survey found 42% of employers implemented policy changes before the 2016 injunction. Now in anticipation of the new threshold, according to the results, 40% of employers are reviewing job descriptions to verify the classification of current employees, and 36% are auditing compensation to identify which employees the new threshold will likely impact.
Lotito said when employers take a reactive approach to new regulations rather than proactively figuring out how they’ll be affected, he believes they give up the chance to have a voice.
“The trade association people often beg their members to provide them with concrete examples so that they can be more effective in advancing the interests of their members. They often beg their members to testify, to participate in studies, to give anecdotal information.”
Companies often remain wary of speaking out on controversial topics, he said, but the most nimble and successful organizations are developing specialized government affairs arms and actively learning how to use tools such as internal government relations departments and external lobbying.
“Everybody deals with the fire of the day, and it’s not the fire in the front yard. It’s the fire in your kitchen,” Lotito said of companies that stay in reactive compliance mode to new regulations. “And you’ve got to be cooking while the fire starts.”