Guide for How to Respond to FLSA's New Overtime Exemption Requirements

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The Department of Labor is implementing its new overtime requirements effective December 1st. The change is dramatic and is the first major overhaul to the Fair Labor Standards Act (FLSA) since the last update back in 2004. Companies that are not prepared could be in for a rude awakening. An estimated 4.2 million white collar workers who are currently classified as exempt from overtime will be impacted. We wanted to provide some guidance on what employers can do to ensure that they are adequately prepared for handling the new salary threshold requirement – consider the below as a quick set of guidelines that can help you navigate the new rules.

  1. Identify salaried employees who are currently classified as exempt, but have salaries which fall below the Salary Level Test's new threshold ($913 per week, or $47,476 per year).

  2. Review the options that exist for responding to the new salary threshold requirement. Generally speaking, employees with salaries falling below the new threshold ($913 per week, or $47,476 per year) will not be eligible for being classified as exempt from overtime. Employers should consider the unique needs of their business before making a decision on which option to pursue: 

    Keep the job classified as exempt but increase employee pay to be above the new salary threshold. This may be a viable option for employees who meet the duties test and who are paid on a salary basis. Employers should consider this option if the costs associated with increasing employee compensation above the new threshold is nominal or expected to be less than the anticipated costs tied to paying the employee for overtime hours worked. Any changes in salary should be clearly communicated to affected employees.

    Reclassify the job as nonexempt and pay the employee for the additional overtime hours worked. This is the simplest of the three choices, but costs associated with this option can easily blow out of proportion. Consider this approach if employees do not normally work more than 40 hours in a workweek and in cases where there are minimal spikes between pay periods in the number of overtime hours worked. Employers must ensure that they accurately understand the number of hours being worked each week so that future labor costs can be forecasted with reasonable accuracy. This is an ideal option if costs associated with increasing employee pay are greater than simply paying the employee for any overtime hours worked in the future. 

    Reclassify the job as nonexempt but minimize overtime hours by realigning hours and staff workloads. This option emphasizes accurate schedule management and ensuring workloads are evenly distributed amongst employees so that overtime hours are minimized. Managers should be proactive and vigilant in identifying employees who are approaching the standard 40-hour limit before any overtime hours are worked.

  3. Decide now whether to reclassify other positions that may be impacted by future automatic increases to the Salary Level Test. Proactively preparing for future changes now will help save time and manage future risk when the first automatic increase to the threshold for the Salary Level Test goes into effect in 2020. 

  4. Confirm that state and local ordinances, such as paid sick leave requirements, are properly being complied with.

  5. Update existing policies and employee handbooks accordingly to reflect any changes made.

  6. Ensure managers are equipped with the proper tools and resources for communicating the changes to impacted employees.

  7. Train employees on new processes before rolling out any changes.

How Replicon Can Help
Replicon’s solutions help employers stay compliance with wage and hour laws in a number of ways:
  • Manage employee schedules. Replicon offers schedule management which assists with optimizing employee working hours. Proper schedule management helps with preventing employees from being overscheduled and also from working excessive amounts of overtime. 

  • Use timesheet validation rules to ensure that working hours stay within an expected range. Validations rules can be utilized for ensuring that employees timesheet hours stay within an expected range. A number of default validation rules exists for helping to prevent working hours from exceeding defined limits. For more information on timesheet validation rules, please visit the Replicon Customer Zone

  • Use Replicon’s pre-defined pay rules library for ensuring proper adherence to pay regulations. Replicon provides a library of pre-defined pay rules for each US state and Canadian province. We created and continue to maintain these rules based on the labor laws of each jurisdiction. Replicon’s pay-rules library has coverage for all 50 states. For more information on pay rules and the pre-defined library, visit the Replicon Customer Zone.
For additional information, please refer to the PowerPoint slide deck summarizing the changes going into effect on Dec.1st by clicking here
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Jon Burns, Official Rep

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