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October 15, 2015
10 ways employers should prepare for final overtime regs

Still have questions regarding the overtime regs? Attend our live Q&A webinar "Overtime Exemptions At Risk: How to Classify Employees and Comply with the New FLSA" on November 10, 2015.

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The Department of Labor’s (DOL) final overtime regulations are due out anytime within the next few months. Here are 10 steps employers should take now to prepare for the release of the final regulations:

(1) Familiarize yourself with the proposed regulations.

Steps to prepare for overtime changesThe DOL has proposed to increase the salary level for exemption from overtime to $921 per week, from the current salary threshold of $455 per week. The DOL also proposes to set the total annual compensation level for highly compensated employees (HCEs) at $122,148 per year.

The DOL proposes to automatically update the standard salary and compensation levels annually either by maintaining the levels at a fixed percentile of earnings or by updating the amounts based on changes in the Consumer Price Index for All Urban Consumers (CPI-U). This would raise the salary threshold to about $970 a week ($50,440 a year) in 2016.

(2) Review your job descriptions now

Determine whether your job descriptions are still accurate, reflect the jobs being performed, and reflect the skills necessary to perform the job. Review employees’ actual job duties to ensure that they still fall within the administrative, executive, professional, computer, or outside sales exemptions. Doing this now will ensure that when the regulations change, your job descriptions will be accurate and ready to go.

(3) Identify which jobs are likely to shift categories under the DOL’s proposed regulations

Employees who may be newly nonexempt and entitled to overtime under the final regulations include food service, hospitality, retail, office services, lower level administrative employees, call centers, and employees in other industries relying on lower paid supervisors and staff. Also, those exempt employees earning more than $455 per week, but less than $921 per week, will likely be impacted.

(4) Conduct a self-audit

Conducting a self-audit helps ensure compliance with federal and state laws. Wage and hour class and collective action lawsuits are big business for plaintiffs’ attorneys. Attorneys are learning to question a potential client about wage and hour issues during an initial interview.

Even if a client came in regarding a completely different issue, such as age or sex discrimination, a persistent attorney can usually find a violation of the wage and hour regulations. Plaintiffs don’t have to be in a protected class, and awards include back pay, liquidated damages, and attorneys’ fees.

To help ensure that your company will not be subject to a Fair Labor Standards Act (FLSA) claim or a DOL audit, conduct an internal audit. Employers can hire attorneys to audit their companies—or they can do it themselves—before DOL initiates an investigation.

(5) Analyze the potential financial impact of this group of jobs shifting from the exempt to nonexempt category

BLR’s Proposed Overtime Rule Calculator can help you determine and understand the impact of the proposed salary threshold for overtime exemptions and to calculate the impact of the proposed salary threshold for highly compensated employees.

(6) Outline future options

Outlining your future options will help in reducing overall costs:

  1. Drop the hourly rates of newly nonexempt employees, so the total cost when paying overtime will be comparable to the salary they were paid when they were exempt.
  2. Reduce fringe benefits such as health insurance contributions, 401(k) match, vacation, sick days, etc. to offset the increased overtime costs.
  3. Increase the salaries of a group of employees to place them in the exempt category in order to avoid paying overtime.

(7) Educate senior managers

Educate senior managers about the regulations and the potential impact on the organization. Work with management to develop an action plan. Before you engage in an internal audit, you’ll want to make certain you have the full support of upper management.

This is key, because you must know that management is willing to come up with the funds if your audit reveals areas in which back overtime pay or other monies are required. Upper management must be willing to acknowledge any problems with your policies and practices and must be ready to make changes to ensure compliance with the law.

If upper management refuses to support your audit, you could actually be exposing your company to even more legal liability. If your company refuses to make corrections after you have unearthed problems, you will likely be seen as willfully violating the law.

(8) Implement timekeeping and recordkeeping changes.

Employers may use any timekeeping method they choose as long as it is complete and accurate. For example, you may use a time clock, have a timekeeper keep track of employees’ work hours, or tell workers to write their own times on the records.

Also, every covered employer must keep certain records for each nonexempt worker. The FLSA does not specify a particular form for the records, but does require that the records include certain identifying information about the employee, the hours worked, and the wages earned.

(9) Train supervisors and managers.

Train managers so they are fluent in the language of the FLSA. It is important that supervisors and managers take the time and make a concerted effort to understand and familiarize themselves with the FLSA and its changes.

Supervisors will be the first line in communicating changes to employees. Reclassifying an employee from exempt to nonexempt offers overtime options, but may appear to be a loss of status. While some employees will welcome the chance to receive overtime pay, others may see the need to track actual hours worked as a demotion.

On the other hand, some employees will likely reject any change in status that will cause them to lose the ability to earn overtime. Employers should be prepared to discuss any benefits of a new exempt position, including vacation or other benefits that may be more generous or other privileges that exempt employees enjoy.

(10) Consider contacting an attorney.

If you are concerned that your organization may have wage and hour issues, you should contact an attorney experienced in wage and hour investigations as soon as possible. An attorney can provide details about the employer's rights and responsibilities from the outset.

In addition, if your attorney assists on reviewing job classifications and development of an action plan, information may be protected by the attorney-client privilege if there is an investigation.

Susan PrinceSusan E. Prince, J.D., is a Legal Editor for BLR’s human resources and employment law publications. Ms. Prince has over 10 years of experience as an attorney and writer in the field of human resources and has published numerous articles on a variety of human resources and employment topics, including compensation, benefits, workers’ compensation, discrimination, work/life issues, termination, and military leave. Ms. Prince also served as an expert on several audio conferences discussing the 2004 changes to the federal regulations under the Fair Labor Standards Act. Before starting her career in publishing, Ms. Prince practiced law for several years in the insurance industry and served as president of a retail sales business. Ms. Prince received her law degree from Vermont Law School.

Follow Susan Prince on Google+

Questions? Comments? Contact Susan at sprince@blr.com for more information on this topic

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