Employers Be Prepared – Updates to the Overtime Exemptions are Changing

UPDATE:  Employers across the country are still holding their breath, particularly as salary budgeting for 2016 is coming due.

As reported in my previous WillisWire blog, in July of 2015 the Department of Labor (DOL) proposed new minimum salary requirements for exempt employees and opened them to comment from the public. In short, the proposed increase is from $455/week to $921/week initially, with the amount rising in mid-2016.

The call was opened to comments from the public, and as of September 4, 2015, the comment period was closed. The DOL received over 290,000 comments, which must be reviewed prior to publishing a final regulation. Multiple sources responded, including employers, law firms, individuals and industry organizations such as WorldatWork  and the Society for Human Resources Management (SHRM).

Although the definitions for exemption are not currently affected, whatever is decided based on these comments will impact almost every aspect of an employer’s business—not to mention the bottom line, due to the increased number of workers eligible for overtime.

Although we still do not know what the final regulations will encompass, and whether the definitions of exemptions will be affected, employers don’t have to be stagnant – I cannot emphasize this enough! Although there have been no updates, again consider the following and start preparing now, as many companies are currently, if they have not already, beginning to project 2016 salary budgets.

Here’s a reminder of some items that you may want to consider:

1. Labor Costs

First, employers should begin evaluating the impact on their labor costs now. What will the financial impact be if all workers whose compensation is below the proposed minimum salary must be paid overtime? Examine your current workforce composition to see where individuals fall.

  • Are there any workers whose salary is on the cusp and can be adjusted?
  • What considerations will need to be made when reviewing the budget for 2016?

2. Timekeeping Practices

Second, review your timekeeping practices. With the increase in the number of workers who will be subject to the record-keeping requirements, employers need to ensure that their timekeeping practices can keep up with the demand.

  • What will the impact be on your payroll processes when having to calculate overtime for the increased number of workers?
  • Is it time to take a look at that upgraded time and attendance system?

3. Job Descriptions

Third, immediately start taking a look at the job descriptions for ALL workers. Best practice is to review these annually, as workers’ job duties are continually evolving. If you have not done so in a while, there is no time like the present!

Although the proposal announced last week does not include the job duties tests, the door is still wide open. Having up-to-date job descriptions will ensure that when changes do happen, you are prepared. You may even identify individuals who you have historically classified as non-exempt that you may be able to reclassify as exempt.

4. Communication

Lastly, the changes will require an extensive communication plan, which needs to include proper documentation of any reclassifications and careful implementation and training regarding the updated policies and procedures. Newly non-exempt workers will need to be trained on timekeeping practices and what is included in hours worked.

Additionally, unaffected workers need to be equally considered. Since a number of their colleagues will likely become eligible for overtime, they need to understand the changes and why they were not included. Additionally, SHRM recently published an article that offers some great guidance for employers.

What’s Next?

Other than preparing, all that’s left to do is wait – and we are still waiting!

Even though the comment period is over, it will still take the DOL some time to evaluate the comments. Even so, you should begin to evaluate the impact of these changes on your organization, so when and if they are adopted you are ready.

The DOL estimates that the Final Rule will not be released until mid-2016, since the DOL plans to “rely on data from the first quarter of 2016” in setting the final minimum salary threshold.  There are still some sources, however, that are projecting it could happen end of 2015 or early 2016. Still – stay tuned!!!

 

Disclaimer: This information is provided as a consulting service only.  It is not intended to be and may not be relied upon as legal advice or opinion.  Persons needing specific legal advice should retain the services of legal counsel.

 

About Sara Ritter

Sara Ritter, M.A, SPHR, SHRM-SCP is a Senior Human Resources Consultant with the Willis Human Capital Practice. Sar…
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