NEW YORK—Employers have less than six months left to comply with the Department of Labor’s (DOL’s) new overtime rule, and they need to start putting a plan together now.
Starting on Dec. 1, 2016, the minimum salary for employees to be considered exempt from the Fair Labor Standards Act’s (FLSA) overtime provisions will be $47,476, or $913 per week.
If companies currently have exempt employees who are paid less than the new minimum, they need to begin in earnest identifying who is going to remain Exempt, be paid a salary without overtime, and who will be Non-exempt, paid hourly, and will be eligible for overtime moving forward.
Determine Hours Worked
Not surprisingly, most companies do not know how many hours their Exempt employees are working. With that said, employers will need to immediately track this information so they can evaluate the costs associated with any change in compensation plans. Employers can talk to immediate supervisors about how many hours their employees are working, or they can talk directly to the employees.
Companies may consider having these employees track their time worked for a few weeks or the next few months to collect this information. Employers will have reliable and factual information to decide if they can continue to pay employees as Exempt on a salary basis, or will need to convert them to Non-exempt, hourly pay.
Including Bonuses Is Complicated
The new rule allows employers to include nondiscretionary bonuses, incentive payments and commissions that are paid at least quarterly to satisfy up to 10 percent of the minimum salary requirement.
Employers that want to take advantage of this must pay a weekly salary of at least $821.70, or 90 percent of the new minimum exempt salary.
Employers can pay bonuses as they normally would, however, at the end of each quarter, they need to make sure the salary and bonus payments work out to at least $913 per week.
As well, employers need to have excellent controls in place to make this work. You may wish to contact your outside counsel prior to and after developing your plan.
Communication and Training
Wage and hour training is essential, particularly for “new” non-exempt employees who have never had to track daily their hours of work.
Companies should make sure employees who are not used to the rules for non-exempt employees are not working during their meal and rest breaks, conducting business when not at work, or using their laptops at home without tracking their time.
Employers also have to review their existing travel policies, benefits and other programs, and how they will apply to newly non-exempt employees.
It should be explained to employees that this rule was mandated by the federal government and that any reclassification is not a demotion, and that each of these newly affected employees’ status had to be changed to comply with the new federal FLSA new rules and that they are still valued members of your organization.