Martucci, Harrison and Inomata Discuss Effects of Proposed Rule on Retailers

Shook, Hardy & Bacon Partner Bill Martucci, Associate Ashley Harrison and Staff Attorney Meg Inomata have authored an article for Law360  on the Department of Labor's (DOL's) proposed revisions to the Fair Labor Standards Act (FLSA) that would adjust which employees are exempt from the act's minimum wage and overtime requirements. Among other exemption requirements, the current provision classifies employees who make no less than $455 per week on a salary or fee basis ($23,660 annually) as exempt, while the proposed rules would adjust that number to the 40th percentile of weekly earnings for full-time, salaried workers, or about $970 per week ($50,440 annually).

Martucci, Harrison and Inomata focus on the effects this rule would have on the retail industry if enacted. "Retailers will need to assess whether previously exempt positions, such as assistant store managers, would be subject to the FLSA’s overtime pay requirements under the new rule," they write. "A significant increase in the number of hourly retail workers may lead employers to consider overhauling their staffing models. Employees, such as assistant store managers previously covered by Section 13(a)(1)’s white collar exemption, may be reclassified as hourly employees and experience decreased working hours as employers attempt to reduce overtime payments."

The proposed changes will also likely affect litigation trends and public policy, they write. The rule could spur new litigation in the wage-and-hour arena by subjecting millions of currently exempt employees to the minimum wage and overtime requirements, resulting in higher payroll and litigation costs for employers.

"The already very active wage-and-hour litigation arena is likely to become even more active because of the changes set forth by the DOL," Martucci, Harrison and Inomata conclude. "As has been the case for years, employers will continue to face more FLSA lawsuits and will likely continue to incur increasing costs in resolving these matters. For the retail industry in particular, the proposed changes will likely reshape the way employees are classified, scheduled and paid."