What should you do about employee overtime?
A federal court has put a key new rule into limbo
Many employers have been working to comply with the Department of Labor’s (“DOL”) Final Overtime Rule (“new rule”) which would have raised the salary threshold from $455 to $913 per week ($23,660 to $47,476 per year) for the executive, administrative and professional exemptions from the overtime rule.
Shortly before its scheduled effective date of Dec. 1, 2016, a federal judge blocked the implementation of the new rule. The DOL has appealed the ruling, which means the new rule’s future is up in the air and may be for some time. The change in administration may also impact the new rule’s future.
Because of this uncertainty, if you have already implemented the new rule, you should carefully consider whether to leave the changes you have made in place. If you have not implemented the new rule, you may, at a minimum, want to confirm that you are accurately tracking and recording overtime in the event the block of the new rule is lifted and compliance is required back to the original implementation date.
In any event, employers should take the opportunity to review their compliance with current overtime laws, and ensure they have properly classified employees as exempt or non-exempt. The start of the New Year can also serve as an opportunity to re-evaluate employee salaries and wages.
Below are six practical pointers for addressing wage and hour compliance in the interim to avoid potentially significant liability for wage and hour violations.
Review compensation plans and assess exempt and non-exempt job status.
Employers should consider reviewing and reassessing their employee compensation levels, re-evaluating their designations of exempt and non-exempt employees, and reviewing job descriptions to ensure they accurately reflect the primary duties of the job and align with the needs of the business.
To be exempt from overtime, an employee must meet several tests, including being paid on a salary basis at the minimum thresholds, and performing primary job duties that fit within one of the exempt job classifications (the executive, administrative, professional, outside sales or computer exemptions).
Employers should have job descriptions that clearly define the primary duties of each job category and should evaluate whether employees that have been designated as exempt do, in fact, meet the primary duties of the job.
Consider compensation options.
Compliance with job classification, minimum wage and overtime rules requires review of employee compensation plans. In addition to base wages or salaries, compensation plans may include bonuses, salary increases and other incentives. Plans should be reduced to writing and contain clearly defined terms, with the components of total compensation easily determinable. If some compensation components are intended to be discretionary, that should be clearly stated.
Review local and state laws for compliance.
In the recent election, several states increased their minimum wage. Employers should review state and local laws to determine any changes in the law and to assess their compliance with those changes. Employers should invest resources to fully understand and comply with wage and hour laws, including compliance with any changes in the state or federal law that could impact their workforce. Investing in such compliance efforts is often much less costly than facing claims for non-compliance.
Notify and get acknowledgements from employees.
Employers should communicate any changes to rules, policies or compensation plans so that every employee affected is aware that his or her compensation or classification will be changing. Written notification to and acknowledgements from impacted employees will ensure that employees are aware of the changes, understand the changes and their impact, and will enable the employer to properly track these changes. However, if you do not want your notification or acknowledgment to create an employment contract, be sure to include an appropriate disclaimer.
Employers should revisit timekeeping practices to ensure that the records required by law are being maintained and that employees understand how to accurately record time. Employees should be told to record all time worked. Employers need to properly address off-the-clock work, such as working from home or during rest or meal breaks. Employers may want to prohibit unauthorized overtime and require advance approval for any overtime. Enforcement of such policies is critical. Unauthorized overtime must still be recorded and may have to be paid.
Assess whether to change your compensation structure.
Employers may choose this time to implement changes in employee compensation structures. When preparing to implement the new rule, employers may have identified jobs that should be restructured, reclassified, or compensated in a different manner. For example, employers could use this opportunity to shift employee schedules or hours to better balance employee and employer needs or to help control employer costs.
Employers may want to use this opportunity to talk to employees about the rising cost of doing business and how employees can help the employer control costs. Employers may also want to take the opportunity to acknowledge and reward hard-working employees and/or to make price changes.
Becky DeCook and Stephanie Loughner are partners at Moye White LLP and co-chairs of the Denver law firm’s Employment Group. Contact them at firstname.lastname@example.org or email@example.com or at 303-292-2900