Proposed Overtime Changes - Act Now

One of the most considerable events in recent employment law history is the proposed overtime rules changes to the Fair Labor Standards Act's white-collar exemption.  In addition to the likely change to the Salary Test Level, there may be changes to the Duties Test.

The classification of 'exempt' or 'nonexempt' remains a challenging principle for some small businesses to understand and appropriately incorporate.  It is crucial for small businesses to recognize that preparing your organization now will have lasting benefits regardless of what the specifics end up being.

So where do you start?

1. Connect with your HR Professional to determine what the changes may mean to your business.
2. Understand which of your employees may be affected (look at your compensation details).
3. Start communicating now.  Informing employees that you are looking at the technical aspects of compensation now will show your transparency while crafting compliance and prevent your workforce from feeling surprised when changes are implemented.
4. In your communication, solicit feedback so you are prepared to answer employee questions.

What is all of the fuss about?

Currently, employees who earn a salary of more than $23,660 per year are exempt from receiving overtime pay.  The proposed changes raise that salary level to approximately $50,000 per year.  Assuming that there is no change in job duties, employees earning less than $50,000 will be entitled to receive overtime pay once the new regulations are set in place (2016).

Ok, now I have your attention.

It is recommended that employers review the hours that each salaried employee is working.  That will be your starting point of understanding how to proceed in order to be in compliance.  For example, if the group of employees who earn less than $50,000 annually does not work overtime (over 40 hours a work week in Connecticut), you may only have to focus on a method by which to capture hours worked going forward.  That way, if overtime is worked, you have a system in place to appropriately compensate the employee according to the Fair Labor Standards Act.  Conversely, if this same group of employees routinely works more than 40 hours in a work week (see your own state guidance on overtime) you be able to quantify that information in order to determine how to best move towards future compliance.

As an employer, it may seem that you have two options: pay the overtime or increase salaries.  However, you have many tools that can work along with these options.  Employers may look to revise job roles and responsibilities.  It may be possible to shift tasks, increase responsibility and adjust compensation in order to keep some jobs as exempt. This may reduce the number of positions you have that will be entitled to overtime pay.

There is no 'cookie cutter' answer.  Each company will have to do their research, analyze the results and determine a strategy to implement that fits their unique set of business circumstances.  Small businesses should be identifying their HR Partner now to be prepared and compliant.

Jenny Castle Human Resources Consulting can assist you with this, or other, compliance issue.  Contact [email protected] for further information.