Overtime Rule May Reduce Telecommuting Options

Changes in employees’ work habits will likely be necessary

By Allen Smith, J.D. May 3, 2016
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Updated 5/17/2016 

The range of workplace changes brought on by the new overtime rule will be broad, including the possible demise of telecommuting at affected companies. 

The new rule's exempt salary threshold level of $47,476 is slightly less than the proposed rule’s $50,440. Many reclassified employees will have to change their working habits, which could particularly affect those who work from home, management attorneys say. (See SHRM Online’s FLSA Overtime Rule Resources page.) 


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When an exempt employee telecommutes, the employer normally just needs to make sure the work gets done to its satisfaction, noted Paul DeCamp, an attorney with Jackson Lewis in Reston, Va. But for workers newly classified as nonexempt, thanks to the new rule, employers may not wish to shoulder the burden of monitoring and compensating for hours worked.

“Of particular concern for employers is the risk that employees will underreport hours worked and then later present claims for alleged off-the-clock work, likely at overtime rates,” he said. Processes for reporting time worked, such as software programs that monitor work activities, may help protect employers from claims that a supervisor knew a nonexempt employee was working unreported overtime. Nonetheless, the risk of such claims “may tip the balance for many employers against allowing telework” for reclassified workers, DeCamp said.

Precedent also is a key issue for companies trying to determine next steps regarding nonexempt telecommuters.

Employers will need to consider if they will allow some nonexempt employees to continue to work from home “because if they do, they can expect reclassified employees who lose the ability to telecommute to question why other nonexempts get to do it,” DeCamp added. “If the messaging is that the company needs to end telework in light of the reclassification, internal consistency, or at least well-thought-out reasons for any seeming inconsistency, will be critical.” 

For example, an employer may permit a nonexempt worker with a disability to telecommute as a reasonable accommodation.

No Knee-Jerk Reaction Necessary?

Of course, some employers will be motivated to find solutions for their reclassified out-of-office staff.

“The final rule might lead to a slight decrease in telecommuting for exempt employees who are reclassified as nonexempt, especially for employees who work for employers who do not typically allow hourly employees to telecommute,” said Denise Drake, an attorney with Polsinelli in Kansas City, Mo. 

She added, “I don’t think a knee-jerk reaction is necessary, however. The change from exempt to nonexempt does not require that an employer change its telecommuting arrangements. It does require a change in the employer’s policies, expectations and monitoring of the employee’s work.”

And it may require a change in a telecommuting employee’s work habits, she explained. “An employee who liked to work at varying hours of the day, whenever it suited his or her schedule, may need to be limited to certain core working hours,” Drake said. She noted that reclassified employees will need to carefully track and report all time worked.

Switching from telecommuting to working onsite is frequently easier said than done, observed Robert Boonin, an attorney with Dykema in Detroit and Ann Arbor, Mich., and immediate past chair of the Wage and Hour Defense Institute, a network of wage and hour lawyers. 

“Some employees who have become accustomed to the arrangement, or were even hired pursuant to such an arrangement, may not live a reasonable daily commuting distance from the worksite,” Boonin said. “As a result, some phasing in of the conversion may be needed. If that’s done, the employee should have a clear understanding as to how work time is to be tracked, and if and when overtime may be worked.”

While Boonin said the final rule is likely to lead to less telecommuting, he added that “employers need not rule out allowing telecommuting arrangements” with nonexempt employees. After all, “in most cases, once they’re in place, the unspoken understanding is that telecommuting is the status quo,” he noted.

“But both the employer and the employee must fully appreciate that the ground rules for such arrangements will not be as flexible as they were while the employees were exempt. These ground rules must be in writing and signed off by both,” he added.

Employers that decide that workers reclassified as nonexempt can no longer telecommute may want to allow those workers to use paid-time-off days for a limited adjustment period. “Employers will likely want to balance this option with the possibility that some of these employees may eventually decide to leave the company, thereby creating some additional expenditures of time and money in recruiting,” said Carol Barnett, an attorney with Polsinelli in St. Joseph, Mo. “This may, however, be a risk employers will want to take.”

An employer also might give reclassified employees the option of working an alternative workweek if telecommuting is denied, Drake noted. “The employer may allow the employee to work four 10-hour days, rather than five 8-hour days,” she said. “This provides the employee with one day when the employee need not commute to the office.”

Allan Bloom, an attorney with Proskauer in New York City, noted that while the final rule may lead to less telecommuting, a company “might want to employ a worker in a state where it has no office, or it may want to reduce its physical office footprint generally, or the particular job might be one that is best performed remotely or on the road.”

“Many employers allow nonexempt employees in certain types of roles to work remotely,” DeCamp observed. “It is largely a matter of having a comfort level that the employer can adequately monitor the employee’s productivity, maintain work quality and accurately account for the hours worked.”

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