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FLSA’s New Overtime Rule: How It Impacts Employers and More than 1 Million Employees

By ComplyRight –

Warehouse employeesOn September 24, 2019, the U.S. Department of Labor (DOL) announced a final rule that will make 1.3 million workers newly eligible for overtime pay.

Under the new guidelines, the minimum salary threshold increases to $684/week ($35,568 annually), effective January 1, 2020. With very few exceptions, employers must pay time-and-a-half to workers making less than this amount for any hours over 40 per week.

The white-collar duties tests for executive, administrative and professional employees remain the same. This means employees will only be exempt from overtime if they earn more than $35,568 annually and pass one of the existing DOL job duties tests.

Identify Affected Employees

Your first step to prepare for the new rule is to pinpoint employees who may be impacted by the change. (Consider reviewing all employees making less than $40,000 a year since the salary threshold could increase in the future.) If employees making less than $35,568 are already non-exempt or “hourly,” no change is needed. However, if you have employees under the threshold who are exempt or “salaried,” you’ll need to take action.

Decide if it’s more cost-effective to increase salaries to the new minimum to avoid paying overtime – or to reclassify affected employees as non-exempt and track their overtime. If you go with the former, be sure to confirm actual job duties to make sure newly exempt employees meet a DOL job duties test. And for the latter, look closely at average hours worked per week. You want a clear picture of how much potential overtime pay you’re facing with reclassified employees.

Communicate the Change

A communication plan is essential for any employees moving from exempt to non-exempt status. Expect employees to have a lot of questions and concerns. You may need to address questions such as: “Why do I have to clock in and out?” and “Why does this affect me and not my coworkers?”

You should also anticipate a wide range of emotions from your employees. Some employees may be happy to be paid for all hours of work including overtime. Others, however, may feel like they are being demoted. Some may even be upset about losing a certain degree of flexibility and having to maintain accurate time records.

The most important part of your communication plan is to emphasize that the changes are required by federal law and not at the company’s discretion. Reassure employees that any reclassification is not a reflection of the individual’s value, but a necessary compliance tactic.

Additional Administrative Considerations

Besides communicating with your employees, you’ll need to handle additional administrative responsibilities when converting employees from exempt to non-exempt. For example, it will be necessary to document payroll status changes, as well as update job descriptions if an employee’s job duties or responsibilities changed to meet the guidelines.

You may need to update (or implement) a reliable timekeeping system, too. You can legally use any method you prefer as long as you maintain accurate records of all hours worked.

Train Employees and Managers

Another important step is training newly non-exempt employees on relevant procedures, including:

– Overtime approval process
– Limiting off-the-clock work like checking emails at home
– Break policies
– How to keep and report hours worked
– Making changes or corrections to time records

You should also train your managers on how to oversee non-exempt employees, as they play a big part in FLSA compliance. Supervisors who don’t properly manage non-exempt employees, like allowing off-the-clock work or ignoring unauthorized overtime, increase the risk of an FLSA lawsuit.

As a best practice, consider putting your wage and hour rules – and your timekeeping procedure – in writing, and distribute them as a policy. Make sure to have all staff acknowledge that they have received and read the policies.

More Resources Are Available

For more information on the new FLSA rule, check out ComplyRight’s FAQs about the New FLSA Rule. ComplyRight also offers free online training to help you understand the differences between exempt and non-exempt workers and how to correctly classify workers.

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About ComplyRight: ComplyRight’s mission is to free employers from the burden of tracking and complying with the complex web of federal, state and local employment laws, so they can stay focused on managing and growing their businesses. ComplyRight tracks federal, state and local regulatory activity, creates practical, affordable solutions that streamline essential tasks, and complements these solutions with educational content and actionable guidance. From hiring and training, to time tracking and record-keeping, to labor law posting and tax information reporting, ComplyRight’s innovative products and services address the real-world challenges employers face every day.

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