[Editor's note: A federal district court has granted a preliminary injunction blocking the overtime rule from taking effect Dec. 1.]
Companies have some steps to complete and decisions to make to comply with the Department of Labor's new overtime regulations, which take effect Dec. 1.
Two HR experts—Christian Antkowiak, counsel in the Labor & Employment section of Pittsburgh-based Buchanan Ingersoll & Rooney PC, and Michael Abcarian, managing partner of Fisher Phillips in Dallas and an expert on wage and hour laws—offer this checklist:
- Audit all currently exempt positions to determine if they meet the regulation's new salary requirements and the duties test.
- If a currently exempt employee typically doesn't work more than 40 hours a week, there may be no practical need to raise his or her salary to the new threshold. Instead, consider reclassifying him or her as nonexempt. "The loss of the exemption—and the corresponding need to pay workers in that position at overtime rates when they work more than 40 hours in a workweek—should be only occasionally consequential, if at all," Antkowiak said.
- If an employer is concerned that some workers will be unhappy losing their status as "salaried," the employer can continue to treat the employees as "salaried nonexempt," which means they can continue to receive their fixed salaries for working up to 40 hours a week, but they must also be paid at overtime rates when they work more than 40 hours a week.
- If an employee typically works more than 40 hours a week, the employer should consider increasing the compensation to meet the new salary threshold ($47,476) so the worker can remain exempt, particularly if doing so would be less costly than paying that worker overtime. For instance, Abcarian said, if a currently exempt employee earns $43,000, "it might be prudent to simply bump them up to $47,476 to maintain the exemption. However, if the employee is earning an annual salary of $35,000, it will be much harder to justify the needed salary increase."
- After doing cost projections, an employer might find that hiring additional employees to work at straight-time rates for 40 or fewer hours could be less costly than having existing employees work significant numbers of overtime hours.
- Consider a one-time adjustment to the workweek. For example, if employees work 12-hour shifts for seven consecutive days but then are off for seven, employers might adjust the workweek to start on Thursday and end on Wednesday, rather than a traditional Monday through Sunday workweek. "In this scenario, changing the workweek would reduce the amount of overtime owed by 36 hours," Abcarian said. But "be aware that playing games through multiple changes to the beginning and end of the standard workweek to periodically reduce overtime pay costs may be disallowed by federal or state compliance officials."
- Train employees whose positions were converted from exempt to nonexempt on time-keeping and overtime procedures. If an employer decides to turn an exempt worker who logs in a lot more than 40 hours a week into an hourly worker, the employer may want to create a policy requiring employees to get approval before working overtime to minimize overtime payroll costs. "However, [even] if employees work overtime without permission, the Fair Labor Standards Act requires an employer to pay them for all time worked," Abcarian said. "While you must pay them, you may also discipline them for violating a policy that prohibits unauthorized work hours."
- Put measures in place to adjust compensation levels every three years, as necessary, per the regulation's requirement.
- Don't forget to consider gender-based pay equity requirements and other potential discrimination issues when adjusting salaries.