Employers like certainty. Even a minor regulatory change can mean huge adjustments to how they manage their workforces. Now the U.S. Supreme Court has thrown a monkey wrench into the gears of predictability that businesses crave.
On March 9, the Supreme Court ruled that the Department of Labor (DOL), which regulates the kind of employees who must receive overtime for working more than 40 hours per week, is free to flip-flop on its interpretation of the Fair Labor Standards Act without notice or an opportunity to comment on the proposed change.
The decision means that important rule changes—such as the upcoming DOL redefinition of supervisory exemptions—could be implemented suddenly, with no opportunity for employers to weigh in on their impact.
The case: The DOL enforces the Fair Labor Standards Act, which governs overtime pay. Extensive DOL regulations tell who must receive overtime pay (nonexempt) and who doesn’t (exempt).
In 2004, under the Bush administration, the DOL promulgatedthat interpreted exemptions like the administrative, professional and executive classifications.
At the time, employers had an opportunity to review the proposed regulations and to make comments, many of which were incorporated into the final rules.
Five years earlier, the DOL had issued an opinion letter stating that certain mortgage banking employees were nonexempt, and thus eligible for overtime pay.
In 2004, a banking industry lobbying group asked the DOL to declare the employees exempt, and the DOL agreed. Then, changing its mind again in 2010, it said they were nonexempt.
The bankers group sued, alleging that such a big change should have been done by regulation, with notice and a comment period.
The Supreme Court disagreed and approved the flip-flop. (Perez v. Mortgage Bankers Association, U.S. Supreme Court, 2015)