Overcome Communication Challenges When Reclassifying Employees

Employers reclassifying employees as nonexempt due to this year’s overtime rule should clearly explain the basis for the change to minimize morale problems resulting from the change.

Employers should communicate that reclassification is not a reflection of the quality of the employees’ work or their contributions to the organization, said Keith Kopplin, an attorney with Ogletree Deakins in Milwaukee. “This is simply something required by virtue of a change in the law,” he said. Organizations also could reference the fairness of being paid by the hour and being entitled to overtime, he added.

If possible, employers should find ways to minimize the impact of other changes required by reclassification, Kopplin said. For example, employers could use exception timekeeping for employees who work fixed schedules so they are only required to indicate when they deviate from their schedule, instead of recording the start and end of every workday and every unpaid break.

Employers should also be sensitive to whether workplace benefits are offered only to salaried exempt employees and, if so, be prepared to address those benefits with the affected workers, Kopplin said.

Basis for Morale Problems

“Many workers won’t fully understand why they need to change from exempt to nonexempt status,” Kopplin said.

They are performing the same work for the same employer, but now they suddenly must record their hours and perhaps minimize their total hours worked to avoid overtime, he noted.

Many exempt workers take pride in being paid a salary and not having to punch a clock. Those who must be reclassified as a result of the new salary threshold may take offense at being told they will have to track their time and possibly be paid by the hour, said Brett Coburn, an attorney with Alston & Bird in Atlanta.

“For many workers, changing from exempt to nonexempt status might feel like a demotion,” Kopplin said. “Before, they may have had flexibility in their work schedule, but now they must record all hours actually worked each day” if exception timekeeping isn’t used. “This can feel like they are losing their workplace freedom and being micromanaged by their employer.” 

The primary challenge when communicating to employees is to overcome the notion that an exempt classification is “better than” a nonexempt classification, said Erika Johnson, director of work, rewards, and career for WTW in Washington, D.C.

In many corporate cultures, progression to exempt work is seen as an important career milestone, so a reversion to nonexempt status may feel like a step backward, even though the job duties remain the same, she said.

There is also a challenge when it comes to communicating with managers—particularly those who have no experience managing nonexempt workers, Johnson said. These managers need to understand the importance of managing time and attendance and must ensure that they are clear with staff on tracking and recording time for all hours worked.

Employees who are being reclassified likely will also ask why their employers aren’t increasing their salaries to reflect the new threshold.

“It is important to make clear that the new rule does not require employers to give anyone a raise and that an employee performing exempt work can still be classified as nonexempt,” Kopplin said.

Commitment to Compliance

Employers should reinforce that the action is not a judgment on the employees’ performance or the value of their work to the company, Johnson said. “It is simply about the organization’s commitment to compliance,” she said.

Organizations should ask for employees’ buy-in with respect to the government mandate and re-emphasize that workers remain the most important resource to the company, said Jeffrey Ruzal, an attorney with Epstein Becker Green in New York City.

Employers should draft key messages tailored to the employees experiencing the change, the managers who oversee those workers, and the HR team supporting the employees and managers throughout the change, Johnson said.

“Multiple communications and trainings should be rolled out for emphasis, including ones close to the implementation date so the policies and procedures are fresh in workers’ minds,” Ruzal said.

The implementation of the overtime rule announced in April takes effect in two phases: first, an increase in the salary threshold to $43,888 as of July 1, and then an increase in the salary threshold to $58,656 as of Jan. 1, 2025.

[Want to learn more? Attend the SHRM Annual Conference & Expo 2024 concurrent session “Wage and Hour Compliance: A DOL Update and Ways to Avoid Common FLSA Overtime Liability Land Mines.”]

Communicate Despite Lawsuits

Communicating about the overtime salary threshold changes and the resulting reclassification of employees is complicated by court challenges of the rule.

If the company intends to follow through with the changes regardless of the outcome of any court challenges, there’s no reason to confuse the messaging to employees with contingencies, Coburn said.

“If the company makes a change before the outcome of the court challenges is known but plans to change course depending on that outcome, it needs to communicate that very clearly—and in writing—to the impacted employees,” he said.

However, Johnson said employers should, regardless of the outcome of the legal challenges, “commit to a course in advance and stick with it.” She said that they should set an internal deadline after which they are committed to the change and not revert regardless of any potential court action.

“Hedging by saying to employees that a change might happen will likely erode employee engagement and trust—particularly for those that are slated for a pay increase,” Johnson said.

She added that in 2016, when the Obama administration’s overtime rule was blocked just before the compliance date, many companies determined it was not worth the cost or risk to employee trust to pull back.