August 2016
James B. Sherman, Esq.
By now most everyone is aware of the Department of Labor’s
new overtime regulations. Effective
December 1, 2016 the minimum salary necessary for exempt status in the
so-called “white collar” positions (executive, administrative and professional),
increases drastically from $23,660 to $47,476, or $913 per week. Any white collar employee currently exempt
from overtime pay, must be paid 1 ½ times his or her “regular rate of pay” if
their salary does not meet this new minimum as of the 1st of
December. For employers, the impact of
the DOL’s new rule and the many issues and decisions it presents – some with
significant consequences to their bottom line – should not be ignored or underestimated. Those that fail to address the many nuances
and details of this fast approaching change to their wage and hour practices, may
encounter serious problems, as well as lost opportunities, even before the end
of the year.
There can be a tendency to over simplify the issues involved
with a change that more than doubles the minimum salary level for the most
common exemptions from overtime. Despite
predictions that the new regulations may impact over 6 million workers come
December 1st, many human resource professionals and consultants are
treating this as a singular issue involving the simple decision of whether
employees will remain exempt, or must be converted to nonexempt status. While this certainly is the primary focus
there is so much more employers should be taking into account if they care to
minimize the impact of the new regulation, not only to profitability but to
everything from employee morale to operational efficiencies and meeting the
needs of their customers.
Here is just a short list of issues many employers are
overlooking as the new regulations are just around the corner:
·
What will be the cost of converting presently
exempt employees, to nonexempt employees entitled to overtime? How many employees must be converted? What will be their “regular rate of pay” for
purposes of overtime pay at 1 ½ this rate?
·
How many hours of overtime do these employees
work? Many employers assume their employees
work little or no overtime, so converting some employees to nonexempt status
will be inconsequential – don’t be so sure. Since few employers record hours
worked each day by exempt employees, they may not truly know how many hours
some employees work. Also, white collar
workers often perform job duties outside of normal business hours; e.g. training,
mandatory business events and certain travel that must be treated as “hours
worked” under the FLSA.
·
If employees receive an increase in salary to
meet the new minimum, can the D.O.L. mandated raise be accompanied by increased
expectations and/or job duties? Yes.
·
Can employees in the same job category be split
between exempt and nonexempt based on the new salary requirement, without
generating discrimination lawsuits?
·
Is this a good time to address some current
classifications of certain positions as exempt that are questionable because
the job duties may not satisfy the requirements of any of the white collar
exemptions?
The answer to the last of the above questions is “absolutely,”
there is no better time to assess and reconsider improperly classified
positions, or to redefine job duties to better meet the exemptions. Failing to fully audit and assess all
exempt/nonexempt positions, prior to the December 1, 2016 effective date of the
new D.O.L. overtime rule, is a lost
opportunity for employers to shore up their defenses at a time when class
action wage and hour lawsuits are at an all-time high.
_________________________________________________________________________________
James B. Sherman is a named shareholder of Wessels Sherman
law firm. He and fellow shareholder from
the firm’s Chicago office. The two submitted comments on
behalf of employers throughout the country, on the D.O.L.’s proposed rules
issued last summer, and have since fielded countless questions and presented a
number of webinars and live presentations to hundreds of business owners, HR
professionals, accountants, consultants (and other lawyers) from numerous
states from coast to coast. For help
with questions, auditing wage and hour exposure, risk avoidance, or strategies
to minimize the impact of the new overtime regulations that take affect
December 1, 2016, contact: James Sherman at jasherman@wesselssherman.com or
952-746-1700.
