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November 20, 2016

New Labor Rules Likely to Hurt Employers with Overtime


Contact: Amanda Edwards
& E Insurance Agency

732-295-5584  [email protected]

( November 20, 2016)  


New Labor Rules Likely to Hurt Employers
with Increased Over Time Payme

4.2 Million Americans eligible for Over time Pay

(Point Pleasant, NJ ) The election is over and while the American Public has declared that it is tired of BIG Government  
and increased regulations,The US Department of Labor new overtime rules will still become effective Dec 1, 2016, updating
The Fair Labors Standard Acts of 1938. (FLSA) . The foundation of the laws that now governed rules of employment hours started
almost 100 years ago were drafted 
by Senator Hugo Black of Alabama and signed into law in June 1938. Black was a former lawyer,
emocrat and progressive Senator, known for both his former membership in the KKK and his pro-Civil Rights rulings.  He resigned  from the KKK after two years in 1926 , became a Supreme court justice nominated by President Roosevelt serving from 1937-1971.  Hugo Black was also part of
the unanimous court decision declaring school racial segregation illegal in 
Brown v. Board of Education (1954). In his later years on the court, Black was known for his dissenting opinion on the right to protest in public spaces and in public schools during class hours. 

But more than 90 years ago, during the NEW DEAL ERA, 
The Supreme Court had been one of the major obstacles to
wage-hour and child-labor laws. Among notable cases is the 1918 case of Hammer v. Dagenhart in which the Court by one vote
held unconstitutional a Federal child-labor law.  Another ruling Adkins v. Children’s Hospital in 1923, the Court in a narrow decision  
voided the District of Columbia law that set minimum wages for women. During the 1930’s, the Court’s action on social legislation
was even more devastating. 
In 1933, under the “New Deal” program, Roosevelt’s advisers developed a National Industrial Recovery Act (NRA). 
The act suspended antitrust laws so that industries could enforce fair-trade codes resulting in less competition and higher wages. (Sound familiar?)
On signing the bill, the President stated: “History will probably record the National Industrial Recovery Act as the most important and far-reaching legislation ever enacted by the American Congress.”  Thus it was Clear even back in the 1930’s that winners and Losers were chosen by
the Government. Roosevelt and His Administration suspended anti-trust laws effecting conditions to create outcomes that were deemed acceptable by the Government—Thus as the fingers of socialism poked away at a free market American economy, 
President Roosevelt asked his Secretary of Labor,  Frances Perkins,  an American sociologist and workers-rights advocate and the first woman appointed to the U.S. Cabinet, about an unconstitutional bill that was tucked away years before. Thus that bill found its way to congress and on a Saturday,June 25, 1938,
to avoid pocket vetoes 9 days after Congress had adjourned, President Franklin D. Roosevelt signed 121 bills. Among these bills was the
landmark law in the Nation’s social and economic development — Fair Labor Standards Act of 1938 (FLSA). Against a history of judicial opposition, the depression-born FLSA had survived, not unscathed, but after a year of Congressional altercation, and the seeds of American Socialism continued to grow under a nicely wrapped package of worker protection. 

In its final form, the act applied to industries whose combined employment represented only about one-fifth of the labor force.  
The FLSA was designed to “put a ceiling over hours and a floor under wages” by establishing an eventual maximum 40 weekly work hours, a minimum wage of 40 cents an hour by 1945, and prohibiting most child labor. Some view these rules and the creation of Social Security as the cornerstone to protecting the American worker from inhuman working conditions and greedy employers, but almost 90 years later
the rules seem trite, archaic and out of date in an environment of 
world-wide competition where time and pennies can make the difference
between success or failure.  
While these rules  extends the rights to over 4.2 million workers who were currently exempt, Employers should brace themselves for the tons of litigation that is likely to erupt as a result of the new rule.  The new rule doubles the salary threshold of white collar workers who are entitled to over time pay to approx $913 per week or $47,476 annually for full time workers, compared to the current $455 or $23,660 annually now. The rule also strengthens the existing overtime protection for an additional 5.7 million white collar workers and 3.2 million salaried blue collar workers whose entitlement to overtime will no longer rely on the applications of duties test. And the final rule also includes a mechanism to update the salary requirement every three years. Legislation has been introduced by congress to block the rule, but its likely that President Obama who has taken pen in hand hundreds of times over the last 8 years to create his own laws,  will likely veto it. The only saving grace may be an elimination of the law by a new President Trump, but that remains to be seen.  

In any case employers will like have to increase monitoring their payrolls to prevent potential lawsuits. The huge amount of new rules and regulations over the last 8 years has been a real burden on business and has been one of the major reason for the lowest level of economic activity since WWII. Regulations have effectively killed the entrepreneurial spirit that made America great, and assisted the larger Companies with their bloated payrolls of attorneys and accountants working through the clutter of the massive bureaucracy created by the Washington establishment, effectively squeezing a majority of small business who can not cope with such paperwork.America cannot. 

In the 12 months ending Sept 30, 2015 there were over 19,322  FLSA related lawsuits which was up almost 8% from the year before, and with the new increases, some industry experts think that amount could potentially double. The potential for inaccurate reporting of employee time will only complicate matters. The essences of a salaried worker because of the nature of employment and duties will change dramatically.  For example, Travel rules, including cell phone calls made on the road to work may be deemed working hours, and the hours after 5 pm may effect the way responsibilities such as emails being checked. Salaried employees who had been exempt had an attitude that they would do whatever was needed to get the job done, and that usually required time before 9 am and after 5 pm, or working through lunch hours or even bringing work home. Now they must stop work at 5 p.m. not do anything not even review an email pick up another call or drop a piece of paper in the OUT Box. This may be very difficult for any manager or supervisors who had that can do attitude. But business owners will have to be more pro-active in their rules and regulations to make sure compliance is followed, lest the potential problems could be enormous. Socialism though in some ways checked by the Trump Win of the 2016 election still has many strongholds in our economy from a foundation of rules and regulations that were born almost 100 years during the President Wilson Progressive movement following WWI. Unfortunately the ability to freely compete on an even playing field world wide, will be hampered by the American worker who has received additional benefits not easily retracted . And the effects similar to those inflicted by Obama Care will have short term effects on the American Economy as it will will continue to suffer the inequities of an world wide market as other countries and foreign business will not be hampered by the smothering effects of regulation choking American business. There are many grey areas that will need to be addressed. But the one thing is clear, the way we used to look at salaried non-hourly workers will have to evolve and employers will have to adjust quickly or face increased risks of lawsuits, declining profits and potential business closures—
Welcome to the New Normal. 

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