5 Steps to Prepare for New Overtime Exemptions Rule

It’s almost mid-year. Are you prepared for the impending changes to the overtime exemptions rule? This rule isn’t like the Affordable Care Act where the changes will be doled out over the course of a decade. No. Once the Department of Labor (DoL) makes its final ruling, you’ll likely have fewer than 90 days, if not fewer than 60 days, to comply. And, those days will be before the year’s end.

That means you need to start preparing now, if you haven’t already, because both your 2016 staffing and budget plans will be affected.

Even though the final rule hasn’t been handed down, there are things you can do to prepare, regardless the form the rules take:

1. Audit exempt employees’ work hours

The DoL has proposed to raise the minimum exempt employee salary threshold from $23,660 to $47,476, so the first step you need to take is to calculate the number of hours current exempt employees work who make less than the new minimum. You can’t assume exempt employees all work 40 hours a week. Many work 45, 50, or more. Many take meetings or conduct job interviews after hours. Others are checking and responding to emails and voicemails after hours and on the weekends. Don’t allow yourself to be blindsided.

The next thing to consider is whether to give raises to those who are below, but very close to, the threshold and who are most likely to work overtime to avoid the overtime obligations.

Note: Non-discretionary bonuses may be allowed to be counted, and possibly commissions, toward 10 percent of workers’ salary levels. That may help to move a few of those near the line over the threshold without having to give them a raise. But, no one knows until the final rules are issued.

2. Assess effects on benefits

Do you have certain benefits for exempt employees that non-exempt ones don’t have? That’s a question you’ll want to address. Once re-classifications are instituted, many people may be losing benefits they may have been enjoying for years.

If that’s the case, should you change your benefits plans to allow those reclassified workers to keep their benefits, or do you want to eliminate those benefits to make up for any costs as a result of now paying those workers overtime?

3. Expand time-tracking systems

Any way you look at it, the non-exempt population is going to swell. That means you need to expand your time-tracking systems to ensure proper overtime pay. A visit with the tech department now will go a long way toward implementing a workable system to handle the new load later in the year.

4. Look at remote work arrangements

What do the impending rule changes mean for remote work: checking and responding to work email and voicemail, taking off-site meetings and calls after work, etc.

You can make all the rules you want to prohibit employees from engaging in these activities, but some of them are just going to do it. And, whether you agree to the overtime or not, whether or not you approve it, you still have to pay for the time spent doing it. And, when that happens, you need to ensure you have a way to track that time so you can correctly compensate them. That’s another reason to get with your IT people now rather than later. They  need time to come up with tracking mechanisms for after-hours and at-home work.

It’s interesting to note that in the Spring 2015 DoL Regulatory Agenda,  the DoL said it is seeking information on “… [T]he use of technology, including portable electronic devices, by employees away from the workplace and outside of scheduled work hours …”

This means there could be  some rule-making on this subject as well — like perhaps a definition of what qualifies as “de minimis” work.

Currently, the FLSA says “de minimis” work (typically five minutes or less) done beyond the 40-hour workweek by non-exempt employees is not compensable.

The common practice of workers reading and responding to emails off the clock on their smartphones, though, has complicated the issue of “de minimis” work.

5. Create a communication plan

Believe it or not, (the DoL doesn’t), being reclassified from exempt to non-exempt feels like a demotion.

If you don’t plan to raise some (or all) of your currently exempt workers’ salaries to the new minimum, you need to have some sort of communication plan in place. If you’re not going to raise some workers’ salaries and they’re about to be reclassified as non-exempt, you need a plan in place for how you’ll break the news to them.

Biggest issues to cover:

  • Punching a clock. More workers will be doing it, and it will look and feel like a demotion. How will you explain why it’s now necessary?
  • Loss of flexibility. Taking time off to go to the doctor or attend a child’s event could result in less pay for newly minted hourly workers. How will you break this news to them?  Will you let them make up the time? If so, will the other hourlies be allowed to make up time?

Bonus: Potential duties test changes

The DoL may eliminate the “concurrent duties” rule and require employees to spend more than 50% of their time exclusively on exempt duties for them to maintain an exempt classification.

Assume those changes will be adopted and you could avoid costly surprises down the road.

Information provided by writer, Diane Faulkner, is not legal in nature. All reviews and opinions are submitted and based upon extensive research, experience in the human resources and labor relations fields and are not, in any way, legal opinions.

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5 Steps to Prepare for New Overtime Exemptions Rule

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