Death, Taxes And The New FLSA Overtime Regulations: Resistance is Futile
Benjamin Franklin once wrote that nothing is certain "except death and taxes." For modern-day corporate employers, however, compliance with the Fair Labor Standards Act’s new overtime regulations is just as mandatory – and perhaps just as difficult to comprehend. With an eye toward the December 1, 2016 effective date for these new Department of Labor rules, many business owners across the nation are scrambling to first figure out what’s included in the regulations, and then how to comply and reduce the likelihood of a federal audit. They might also discover unforeseen opportunities.
Frankly, the fact that these new regulations are upon us should not be a surprise; they have been widely publicized throughout the federal rulemaking period. And despite the recent election and transition to a new administration, the rules will be in place for the foreseeable future. So, just as we’ve all figured out how to pay our taxes, we now have the obligation to embrace this challenge and determine the best compensation and compliance solutions for our organizations.
Here are some key factors to consider:
There are two parts to the new FLSA overtime rules for employees to remain in an exempt classification and not be eligible for overtime. First, they must be paid the new minimum salary threshold of $47,476 annually, which is $913 a week. Additionally, they must pass a job duties test, which is a series of statements for which you must be able to answer "yes." There are no special provisions covering part-time employees and not-for-profit organizations. What’s more, all changes to an employee’s exemption status and/or pay must be implemented to include the pay week which includes Thursday, December 1, 2016.
As we examine our job classifications, position descriptions, work hours and pay data, we might unearth some surprises. For example, we might discover there is more work in a job than any human could possibly do in less than 60 hours per week. Maybe we will find an executive who insists on emailing and calling an administrative assistant after hours regarding work activities to be completed. Perhaps we’ll detect an understaffed department that consistently needs to work a lot of overtime. Or maybe we’ll discover as an organization that we routinely work more than 40 hours per week when exceeding revenue goals.
While this discovery process is an obligation, we should recognize it, too, as an opportunity. In analyzing our work culture and jobs, we will likely find cost-effective (or even profitable) solutions. For example, if a job requires too many work hours each week, we can redesign the job or find ways to streamline work processes. If an administrative assistant is routinely on-call in the evenings and on weekends, we can implement a program for flexible working hours. If a department is understaffed (and overworked), we can add staff, perhaps as temporary or part-time workers. And if we work lots of overtime company-wide, we might simply determine that this is an acceptable practice if the overtime is self-funding through the additional revenue generated.
Ultimately, how we handle implementing these new regulations will affect how our employees embrace this change. If you are going to begin using the salaried non-exempt classification for those employees who were previously classified as exempt, it is a positive change for them. They will be paid their salary for a 40-hour work week and will not make less in any given work week if they work less than 40 hours. At the same time, they will also be paid overtime if they work more than 40 hours in any given weekly time reporting period. And if you choose to limit overtime, perhaps many employees will find the better work/life balance every generation desires. That balance could even have positive health effects and lead to enhanced productivity.
This is a new day not only for employers but for employees, too. Employees previously classified as exempt became accustomed to doing whatever it took to get the job done – coming in early, staying late, working weekends, etc. If they are now classified as salaried non-exempt employees, they will need to track their time.
As business owners, we should embrace this change and use it as an opportunity to take a hard look at our operations. We can take advantage of this new era in compensation and compliance to learn both what we can do differently to comply with the regulations and how we can find even better ways to fulfill our mission and purpose. By rising to the occasion, difficult as it might seem, perhaps even Benjamin Franklin would be impressed.
Cassandra Faurote is President of Total Reward Solutions, a compensation consulting firm.