By Susan Prince, JD, M.S.L., Legal Editor

With the release of the Department of Labor’s (DOL) final overtime regulations, not only will employers and human resources (HR) professionals be dealing with the dollars and cents of shifting numerous employees from the exempt to nonexempt categories under the Fair Labor Standards Act (FLSA), but they will be tasked with bolstering employee morale and handling various emotions about the changes.

Exempt employees will react to a nonexempt reclassification in a variety of ways. Some employees will be generally pleased with the changes, some will be unhappy, and some will have little or no reaction to the change. Reclassifying employees from exempt to nonexempt offers overtime options, but some may consider it a loss of status. While some employees will welcome the chance to receive overtime pay, others may see the need to punch a time clock as a demotion.

How will these FLSA changes affect your organization? The answer depends on the number of employees who fall close to the margins under the new salary thresholds. 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 the proposed $970 per week, will likely be impacted.

Regardless, one fact remains: Employers who do not conduct workforce assessments to ensure that employees are correctly classified under the FLSA's rules face the serious and potentially expensive risks of employee class action lawsuits and DOL audits.

Employee concerns

Employees have a variety of concerns over the new standards for exemption. Below we will touch on a few of them.

Is this a demotion? Some formerly exempt salaried workers may feel that their new nonexempt status is a "demotion." HR and direct managers should reiterate explanations that the new status refers only to the way their pay is calculated, not to their relative position in the department or company.

Habits are hard to change. Other newly nonexempt employees may find it hard to adjust their work routines and continue to work through lunch or stay late. Supervisors must be aware of their employees' work habits in order to avoid unanticipated increases in departmental wage costs. Nonexempt employees must be paid for all time worked, whether or not the supervisor specifically authorized the time.

Will I still be able to advance my career? Newly nonexempt employees may fear that career advancement opportunities will be less available to them. Achieving a promotion from a nonexempt position into an exempt position can be difficult in many companies, therefore some employees may feel at their career path might be blocked by this change in status.

Loss of flexibility. Exempt employees do enjoy the flexibility built into their schedules. Going out for a long lunch or working through lunch are not issues for exempt employees because they are paid for the job, not the time it takes to complete the task. Nonexempt employees may be told not to work overtime, not to work through lunch or rest periods, or not to take work-related calls and e-mails from home.

Will I make less money overall? Many employees have concerns that they may make less money because they are not earning a guaranteed salary. This is especially the case when the hourly rate is adjusted down to account for overtime hours worked.

7 communication steps for employers

In order to minimize morale issues in your company and to avoid paying overtime for time worked that you did not approve, it is important to set the standards for newly nonexempt employees in a way that they understand and accept without feeling they have been demoted or punished.

1. Train your managers. 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. They need to understand why these changes are occurring in the workplace. Supervisors will be on the front line in communicating changes to employees, thereby setting the tone for the changes to come.
2. Explain why the change is taking place. Discuss the fact that these standards are set out by the federal government. It is not based on the discretion of the company and it is not a reflection of how the company views the employee. It is not a performance issue. If employees understand that these are objective rather than subjective standards, they will likely feel less offended by the change.
3. Pay for every hour worked. This is one of the major benefits of nonexempt status—getting paid for every hour worked above 40 hours each week. Managers need to make sure they communicate this point to newly nonexempt employees. No more endless evenings and weekends of work as an exempt employee, feeling like you are not being adequately compensated. You can now directly tie your pay back to the hours you are working.
4. Explain the new timekeeping procedures. One of the most difficult adjustments for the newly nonexempt is being required to track their time down to the minute, or few minutes. Employers need to explain that this is the result of federal regulations, and not a discretionary company decision. Employers are bound by law to keep track of the time nonexempt employees’ work.
5. Regular communication. Regular communication will make employees feel that their concerns have been heard. Give employees an opportunity to ask questions, voice their concerns, and have an open dialogue to learn more about the regulatory changes.
6. Appoint someone other than the employee’s manager as a point person for communication. For some people, complaining to a direct manager is very uncomfortable. It is helpful if employees have an outlet for communication that is not responsible for writing their performance reviews. This can be a person in HR, but it should be someone who communicates well, and has a good understanding of overtime law and its classifications.
7. Be proactive. It’s difficult to change habits you may have had for years, such as working through lunch, checking work e-mails after work, or taking evening work-related phone calls. Supervisors should make it a point to walk around the facility daily and check time cards to be sure nonexempt employees are not working through meal periods or staying late.
   
   Under the de minimis rule, employers may disregard insubstantial or insignificant periods of time beyond the scheduled working hours if, as a practical administrative matter, the time cannot be precisely recorded. But this rule applies only where industrial realities justify the practice and the periods of time involved are uncertain and amount to a few seconds or minutes.
   
   An employer may not fail to count any part, however small, of the employee's fixed or regular work time. If habitual "offenders" are logging extra time out of habit, supervisors should speak to them about adjusting their routines. If employees are struggling to meet workload demands, redistribution or rescheduling may be in order. Communication is the key to spotting, understanding, and resolving these problems.

Prepare now

Create your communication plan now. Who will be the person speaking to employees—their direct manager or some other person in the company? What will this person say and how will he or she represent the changes? Prepare a document that explains the what/why/how/when of the changes to share with affected employees. Be transparent.

Determine which jobs are likely to shift categories under the updated regulations. Pinpoint those employees that are likely to be affected by the changes.

Review your job descriptions now to determine whether they 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.

Then make sure overtime for nonexempt employees has been properly calculated. Conducting a self-audit now will help ensure your company is in compliance with federal and state laws.