4 Steps To Manage The New Overtime Rule

We’ve been fielding questions lately about a new rule that may make more workers eligible for overtime because of a salary threshold increase. The rule, announced by The Department of Labor (DOL), updates the regulations governing which white-collar workers are entitled to the Fair Labor Standards Act’s (FLSA) minimum wage and overtime pay protections.  The new rule increases the salary threshold more than 100%, from $455/week ($23,600/year) to $913/week ($47,476/year). It’s important to note that the rule does not change the job duties test!

thresholdThe rule goes into effect December 1, 2016, and future, automatic updates to the salary threshold will occur every three years, beginning on January 1, 2020.

The DOL estimates that more than 4 million workers who are “exempt” under the current regulations will become entitled to overtime pay in the rule’s first year.  For many employers, this means there is a lot of work to do, including:

  • Reclassifying employees
  • Calculating and tracking hours
  • Adjusting wages
  • Updating time and labor tracking systems
  • Communicating changes to your workforce and more!

Here are four ways you can prepare for what’s coming:

  1. Identify Which Employees are Currently Exempt and Non-Exempt And How They Are Paid.

The first step is to know what you’ve got!  Employers should identify which employees are currently exempt and non-exempt, their pay type (are they paid hourly or salary?), and their current rate of pay. Employers should also identify who currently receives overtime and who does not. Employers must identify which exempt employees will become non-exempt due to the salary threshold increase.

This is also a good time to review all employee classifications to ensure that they are correct.

Job titles alone aren’t enough to determine exempt or non-exempt status! Ask your HR department or payroll staff to pull information for all employees such as their current salary/rate of pay and pay type. But even if an employee meets the exempt salary threshold, employers should evaluate their job duties, as these may dictate whether the employee should be classified as exempt or non-exempt.

Ensure that your job descriptions are kept up to date in a valid and legally defensible manner and have captured essential job functions. Job descriptions are an important part of showing compliance. If a school is audited by the Department of Labor, one of the first things they are likely to ask for are job descriptions and the process by which input was gathered from supervisors and employees doing the work. Make sure you aren’t using canned job descriptions or worse, overlooking them altogether. If designed properly, job descriptions can be one of the most critical tools in building legally defensible human resource practices.

Little Bird HR has created a helpful Classification Checklist. This checklist is designed to help schools determine whether an employee is exempt or non-exempt and, if they are exempt, which FLSA exemption status applies (Executive, Administrative, Professional, Computer-Related, or Highly Compensated.

JOB TITLE GUIDE

Below are common statuses for typical school positions.

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  1. Communicate With Your Staff

And before you panic, remember that in many cases, exempt employees seldom work beyond 40 hours a week!  They have a team who assists them and are able to complete their work in an eight-hour workday.  Some positions, however, are regularly on-call or take a significant amount of work home and continue to work or are constantly on-call at night or over the weekend.

  1. Restructure or Reallocate

In some cases, it is nearly impossible for non-exempt employees to avoid overtime, but in other cases, reallocating job duties may help reduce overtime and the financial burden of complying with the new FLSA salary threshold requirement.  For example, take the position of a transportation director during the winter.  In most schools, this employee evaluates roads early in the morning or late in the evening during inclement weather.  It would be impractical to redistribute these duties. Other positions, however, might include administrative duties that lead to overtime.  Perhaps some of the administrative responsibilities could be reassigned to other team members to reduce the likelihood of overtime.  Examine who is doing what and why.

Conclusion

There are a lot of details to consider when complying with the FLSA changes.  Whatever you decide, make sure that it complies with other applicable laws

besides the FLSA, such as state and local wage-hour requirements. It is important to be thinking about these matters now, so you will be in compliance by December 1,2016, when the FSLA changes take effect.

Baffled By Classifications? Give us a call today so we can answer your questions!

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