Business owners and managers, are you prepared to implement the new Fair Labor Standards Act overtime law that will take effect Dec. 1?
It’s been in the news for weeks, but perhaps you procrastinated, hoping acts by Congress or lawsuits to block it would succeed. Don’t count on it.
On Dec. 1, for employees to be considered “exempt” from overtime, the minimum salary increases from $455 per week ($23,660 per year) to $913 per week ($47,476 per year). One cannot simply call an employee a “manager” or “salaried” and not pay overtime. Also, the employee must also meet the “duties test” of certain job functions to properly be exempt:
Executives – those who primarily manage a customarily recognized department; regularly direct the work or two or more employees and have the authority to hire and fire staff (or whose recommendations are given substantial weight.)Administrators – those who primarily perform non-manual work directly related to the employer’s or client’s management or operations, and which involves discretion and independent judgment regarding significant matters.Professionals – those who primarily perform work requiring advanced knowledge in a field of leaning acquired by prolonged specialized intellectual instruction, such as licensed engineers, doctors, lawyers and teachers.Computer specialists – systems analysts programmers, software engineers and other skilled computer workers.Others – outside sales people and highly compensated employees (earning $134,000 or more). Hospitality, health care and construction industries that typically employ “managers” who work more than 40 hours per week yet are paid less than $23,500 per year are likely to be hit hardest. For those workers who do not earn $47,500 and meet the job duties test, changes must be adopted.
Employers must also implement accurate tracking systems: Writing down “8-5” each day will not suffice. Many workers use their e-devices habitually, blurring the lines between when work days actually start and stop. Do managers ask staff questions by text or email after hours? That is “work” that must be tracked and included when recording time for payroll. If those texts and emails push workers over 40 hours per week (or more than 12 hours per day under Colorado law), overtime must be paid.
So, what is an owner, CEO or human resources professional to do to assure compliance by Dec. 1? Don’t panic; an action plan can still be implemented:
Assess each position: What are the true duties for each job? Does the position meet one of the exemptions above based on the “duties test?” Ask each employee if their job descriptions match what they actually do.
Assess hours actually worked: Ask employees how many hours they typically work each day or week by task. How much time do they spend after hours finishing up reports or responding to questions?
Assess options: If non-exempt employees work more than 40 hours per week, choices must be assessed based on cost vs. benefit and practical realities of your business.Increase the employee’s pay to $47,500 if they meet the duties test.Those who don’t meet the duties test must be switched to hourly pay.Convert “salary” to an hourly rate based on actual hours worked so the net cost is the same.Classify salaried exempt to salaried non-exempt and pay overtime.Reallocate job duties so no one works more than 40 hours per week.Combine two exempt positions into one, delegating non-exempt work to another.Divide a job into two positions so no one works more than 40 hours per week.Contract out certain positions such as an answering service or janitorial work.Develop a verification system to track the hours worked. Time-tracking software may be needed; there are dozens of options. Assure workers don’t work during lunch and breaks without tracking that time. Remote access via virtual private networks and other solutions require log-in credentials that can track time, but also can block non-exempt staff. Monitoring software can track email use by the minute. Electronic messages could include a splash screen to require an employee to click a box that she is not working beyond standard work hours or received before approval to do so. Otherwise, banning staff from accessing or responding after hours may not be feasible. If they continue to work as they wish, you can discipline them, place them on a corrective action plan and eventually fire them – or pay the overtime. Conduct training: People may resist change and tracking time. Craft a message that it not only is required by law for the benefit of workers, but also, your organization wants staff to enjoy a good work/life balance without need to be disrupted by work after hours. Emphasize they remain valued staff and a job reclassification is not a demotion. Finally, prying loose our e-devices may be good for everyone.Caution: There are more specifics of the law and exceptions to the rules stated above. Consult with an employment law attorney for further direction.
Lynne Sholler is an employment law attorney with Sholler Edwards, LLC in Durango, CO. Reach her at 375-7756 or ShollerEdwards.com.Lynne Sholler