A Checklist to Help Employers Prepare for New FLSA Overtime Regulations
By now you have almost certainly heard about the U.S. Department of Labor’s Final Overtime Regulations, considered by many to be the most difficult regulatory and compliance challenge faced by employers since the introduction of the Affordable Care Act (“ACA,” aka “Obamacare”).
The salary level for exempt employees increased and will go into effect December 1, 2016.So, now what? Do you panic and cut staffing, anticipating an insurmountable increase in payroll expenses? Do you put it at the end of your to-do list and worry about it on November 30? Both approaches are wrong. Instead, now is the time to evaluate and plan. Amidst all the news coverage of the new regulations, there has been very little focus on steps employers should take to protect their business or organization, both legally and financially.
We had a great turnout for our DOL Overtime Rule Seminar, June 24th, and we would like to share some of the highlights from the seminar for those of you who were not able to attend. The following is a checklist to help you start to prepare for the new regulations:
- Become familiar with the new regulations. The new salary level for Executive, Administrative and Professional workers will be $47,476 annually ($913 per week) in order to qualify as exempt employees and not pay overtime, up from $23,660 per year ($455 per week). Another provision of the new rule raises the total annual compensation requirement for highly compensated employees from $100,000 to $134,004.
- Identify positions impacted by the DOL’s new regulations. All exempt employees making less than $47,476 per year will be impacted. Make a list of all positions in this category.
- Audit current exempt positions earning less than $47,476. Determine the amount of hours worked by persons in these positions. Some of you already have exempt employees log their hours. If so, pull time records and calculate the cost if you had to pay for overtime. If you do not currently have exempt employees track their hours, you can pull other data which may help you determine the amount of hours these employees are working. For example, computer log-on/off times, entry/exit logs. If you do not have this type of information available, you can start requiring employees to start tracking time now. Although this will not give you a complete picture, you can compile data for a few weeks to use for your analysis.
- Analyze potential financial impact: Increase Salaries vs. Pay Overtime. Calculate the cost of increasing the salary level for each position, as well as what it would cost to make the position non-exempt and pay overtime. This is where your audit information will come in handy. If you have an idea of how many overtime hours are being worked you can do a side-by-side analysis of the financial impact.
- Outline options. There are several approaches that can be taken: (a) increase pay to new salary level; (b) re-categorize employees to non-exempt category; and/or (c) do a combination of both, depending on the position. Regardless, you will want to keep in mind salary compression issues and take into consideration all sources of income so that the total compensation package for newly reclassified employees is about the same as when they were exempt.
- Make decisions. Once you know your options and their financial impact, you can make a decision for each position.
- Draft communication to explain changes to impacted employees. Consider employee morale of those who will be reclassified as non-exempt. Your communication should be well thought out. Even if you are not communicating the change until a later date, you want to have it ready.
- Update policies and job descriptions. Your policies and job descriptions will need to be updated to reflect any changes that you make.
- Implement timekeeping and recordkeeping changes. Many newly non-exempt employees have never kept timesheets. Make sure your timekeeping and recordkeeping policies and procedures are ready for the changes you are making.
- Conduct training. Newly non-exempt employees, as well as those who are supervising them, will require training on timekeeping policies and procedures.
- Get help from the appropriate legal counsel. Consider contacting a labor and employment attorney to help you through this process. An attorney who specializes in labor and employment and government compliance matters can help you ensure that you are looking at all aspects of the new regulations.
If you need help with planning for compliance with this new overtime rule, please feel free to call any member of the ScottHulse Labor and Employment legal team. Also, if you would like to receive our Labor & Employment Legal Updates via e-mail, you can subscribe online.
THIS INFORMATION IS PROVIDED AS A COURTESY – NOT AS LEGAL ADVICE. Please know that we are raising the above issues as a courtesy and for informational purposes only. It is not intended as a substitute for legal advice concerning a particular situation that may be affecting your business.
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