In June 2015, the Department of Labor (DOL) proposed a key change to the provisions for determining exemption from overtime by raising the standard minimum level for salaried workers from $455 per week ($23,660 per year) to $970 per week ($50,440 annually). This rule change also includes implementing a mechanism for automatically adjusting this minimum salary level for inflation.
While the rule is not yet final and is not expected to be in place until 2016, overtime may soon be available to more American workers than ever before. In fact, the Economic Policy Institute reported that the estimated number of workers who would become eligible for overtime pay is between 4.7 – 5.3 million. And this is a change that has great impact on organizations, not only financially but culturally.
Helios HR has worked with many organizations to properly classify employees under the Fair Labor Standards Act (FLSA), and we recommend all employers take this time to:
- Identify the full time, exempt employees whose salaries fall below the proposed new threshold. Determine the possible cost of paying overtime versus raising salaries above the proposed threshold.
- Conduct a complete and thorough review of positions where there may be doubt or concern that employees earning a salary above the minimum threshold do not perform many exempt tasks. For example, a qualifier of being exempt is that the employee must exercise “discretion and independent judgment,” which involves the comparison and the evaluation of possible courses of conduct, and acting or making a decision after the various possibilities have been considered.
- Ensure the proper tracking of all time worked for nonexempt employees. This could mean implementing a timekeeping system that reports actual hours worked every day. And it could mean that employees now must complete a timesheet daily who never had to do so before.
- Review your policies for changes that apply to nonexempt employees. Do time off policies need to reflect that time off can be taken by nonexempt employees in fifteen-minute increments? What does it mean for your organization that nonexempt employees are not eligible for compensatory time off? How will you handle nonexempt employees having access to email and business systems 24 hours a day?
Once you’re ready to implement employee re-classifications, communicate with impacted employees and their managers what they need to do differently going forward and give them tools to guide them through the change process. And don’t forget to let them know what’s not changing or what’s staying the same in their jobs. Clarity around what is expected and required of each and every employee is necessary to successfully managing this compliance issue for your organization.