HR Intel: Uber-Anxiety over Employee Classification and Overtime

Worried businessman in officeA round up of workplace developments and legal trends to help keep HR ahead of the curve

With the public release of the new Department of Labor rule regarding employee classification and overtime around the corner, there is a lot of uncertainty out there in the HR world. Some of the uncertainty focuses on the size of the impact – just how much will our payroll change if this goes into effect? But the primary source of uncertainty seems to be whether the DOL’s “final rule” will actually become final. We’ve heard quite a bit about the new (supposedly) “final” rule, but the process by which it becomes finalized is fairly cryptic.

Bear with me as we take a trip down memory lane, back to eighth grade civics class.

There is a possibility (albeit unlikely) that the Office of Management and Budget (OMB) – the current custodian of the “final” rule – will not release the rule for Congressional approval before May 16. The OMB has a maximum of 90 days to review the rule, and the DOL originally submitted the draft version to the OMB on March 14. The OMB’s typical turnaround time is four to six weeks, but this is a significant change in the regulations, so it’s possible the agency will take longer to review the rule.

So here’s the rub: if the OMB releases the final rule any time after May 16, a quirk in the Congressional Review Act gives the next Congress and President a 60-day window to review the rule before it is made official. It goes without saying that a whole heck of a lot can change between now, the next President and the next Congressional session. Not only do we not know who our leaders will be, but we can hardly predict their positions on this issue.

If the OMB does release the final rule before May 16, there’s pretty much nothing that opponents of the rule can do to stop it – at least until the next Congressional term. If the rule goes forward, it is likely to hurt employers insofar as their bottom lines are concerned by doubling the minimum salary for exempt employees, among other changes.

An Uber-Painful Lesson Regarding Employee Classification

Uber is fighting the classification battle on many fronts, and it seems like every day there is a new attorney or class of plaintiff drivers willing to throw down the gauntlet. Just recently, Uber settled a misclassification lawsuit covering California and Massachusetts drivers to the tune of $100 million. Despite the nine-figure offer, Uber still has to wait for the settlement offer to be approved by a judge because it leaves the plaintiffs classified as contractors, not employees.

Just days after the settlement announcement, enterprising attorneys in Florida and Illinois smacked Uber with another classification lawsuit. This time, the attorneys are hoping to create a nationwide class of drivers. The impact of such a lawsuit could cripple Uber, which has already tried to spread its gospel globally to minimize the impact of the American labor and employment buzz saw on its bottom line.

While the waiting game plays out and companies like Uber get slaughtered in court, employers are simply left to wonder how the new rule is going to turn out. But if you want to predict what kind of impact the new rule will have on your company – and avoid getting exposed like Uber is now – there’s really only one way to find out: reclassify your employees under the new rule and brace for impact.

Typically, reclassification is a delicate process. Not only are you examining your own or a peer’s work in terms of whether the employee was properly classified originally, but by changing compensation, you may be viewed as suggesting to an employee that he or she was improperly classified all along. That may make the “lawsuit idea bulb” go off over an employee’s head. With the new rule on the horizon however, a reexamination of classification status would likely not be viewed suspiciously by employees. Instead, it is yet another opportunity to demonstrate to employees that you’re ahead of the game and looking out for their best interests amidst an ever-changing landscape of regulations.

If reclassification or a review of classification protocols is not your cup of tea, perhaps cross your fingers and pray that both the bureaucratic and electoral processes that make this country great actually work in your favor. For once!

Corporate Shenanigans

Former sporting goods behemoth Sports Authority plans to close all of its US locations after the company elected not to reorganize via Chapter 11 bankruptcy. Instead, the company will likely proceed with an auction of its assets and will close most, if not all, of its 450 locations. If that plan moves forward, Sports Authority will likely have to contend with both the federal Worker Adjustment and Retraining Notification (WARN) Act, and various “mini-WARN” laws around the country at the state level, most of which do not excuse companies moving through bankruptcy from providing the requisite notice to employees.

The CEO of Priceline, Darren Huston, has resigned due to an extra-marital affair he had with an employee after a whistleblower pulled back the curtain on the relationship. This story highlights not only the perils of romance in the workplace, but also the potential disruption to company culture when the CEO (allegedly) violates his own company’s code of conduct.

HR Grab Bag

There’s some positive recruiting news for the Class of 2016. According to various Career Builder surveys and the National Association of Colleges and Employers (NACE), 2016 looks to be the best market for recent graduates in a decade. Two-thirds of employers plan to hire from this year’s class of graduates and overall, employers expect to hire about 5% more new graduates from the Class of 2016 than they did from the 2015 class. The flipside of this positive news is that employers are down on the qualifications of college graduates and their readiness for the modern workplace.

About half  employers who participated in the surveys said that recent graduates don’t have the requisite interpersonal or problem-solving skills that they need. Similarly, about half of employers said that educational institutions are focusing too much on “book learning” instead of real-world learning. Finally, given the heavy interest in hiring recent college graduates for customer service or sales-related positions, one is left to wonder how recent grads with student loans will be able to make ends meet with entry level customer service jobs. Among the many factors driving the coming implosion of the “education bubble,” the lack of meaningful careers available to new graduates is the elephant in the room.

Last but not least, the Herbert Smith Freehills’ M&A report entitled “Beyond Borders” indicates that labor and employment regulations can be a major obstacle to successful mergers or acquisitions. Almost 60% of survey respondents identified local labor and employment regulations as part of the reason a deal failed to succeed. Of that 60%, about 20% said the labor and employment laws were the most significant factor in the failure of the deal. Now more than ever, as the workforce spreads globally, understanding the risks and legal complexities of foreign jurisdictions – before jumping in – will produce results for companies looking to wheel and deal their way to global domination.

How is this song related to HR?

In the last edition of HR Intel, we asked you how “Helplessness Blues” by Fleet Foxes is related to HR. Ever wonder how the mind of a millennial works? This song has often been described as an anthem for millennials and the lyrics can shed some light on the millennial thought process. It starts with a realization that despite being told you’re special and unique, coming to terms with adulthood means finding your place in the world.

However, that does not mean conformity. Instead, it means taking a seat at the table of corporate America, but with a meaningful opportunity to change things and make them better. So if you want to motivate or connect with your millennial employees, give them meaning and purpose in the jobs they do and the tasks they’re assigned. Help them to understand where they fit into the grand scheme of things, and how they can effectuate positive change.

We leave you with “When Doves Cry” by Prince.

Tell us how you think this song is related to HR in the comments section below.

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