The US Presidential election is less than 100 days away. This is the first of a three-part series that explores how the election may influence your staffing models.
FLSA and Your Staffing Model
Many of our readers are familiar with the changes that the Department of Labor made to the Fair Labor Standards Act, or FLSA. This federal law sets forth duties tests and a salary threshold to determine which employees are exempt from overtime (in other words, salaried).
The new rules don't change the duties tests for various exemptions (Executive, Administrative, Ministerial, Learned Professional are just a few). What has changed is the threshold for exemptions. Right now it is $455/week, or $23,660/year. The new regulations will increase this to $913/week or $47,476/year. Note that this is higher than some state exemption thresholds (NY: $35,100, CA: $41,600).
These limits will be updated every three years beginning in 2020 to maintain the level at the 40th percentile of full-time salaried workers in the lowest-wage Census region (which is currently the South). The DOL estimates that the salary threshold will be $51,168 when it is initially adjusted in 2020. This is significant, since for the first time in history the salary level will occur automatically every three years, and won’t require additional rulemaking. For employers, this means that the government won’t take into account changing economic conditions, specific impact on certain industries, or regional differences. It also foregoes the public’s input on rulemaking.
The Rules Are Effective December 1, 2016
Since the new rules are effective before the next president is sworn in, this is one area that you can't ignore. Sure, it's possible that if Trump wins the election, he may order the DOL to review this rule, and possibly revise it. But that takes time, and in the meantime the law will be in effect.
Staffing Model Considerations
Here are a few things to consider as you review your staffing model:
- What's the culture of your company? Is it nimble and open to change, or will it take a while for your executive team to understand the impact of these changes?
- How will your budget be impacted? Since the duties test hasn't changed, it's possible to simply give some of your employees increases to keep them salaried. You may discover that the salary increases more than offset potential overtime costs.
- How will your employees react? In some cases, you may review a job description and realize that the position doesn't meet the current duties test — and that it's truly not exempt from overtime. On the other hand, even if the position meets the duties test, it simply may not be feasible to give increases to employees to keep them salaried. This means that some of your employees will have to start punching in/out at the beginning and end of the day and for meal periods. This is a huge change, and some employees may consider this a demotion.
- If employees are reclassified into hourly (non-exempt) roles, it may be possible to supplement your staffing model with part-time employees. Do you have positions that can fit into a part-time model?
Communication Is Key
Maya Angelou famously said, “I've learned that people will forget what you said, people will forget what you did, but people will never forget how you made them feel.”
As you reclassify your employees, you have a chance to make them feel good about their jobs and the company they work for. When you make changes, consider:
- Employees who were previously salaried will now be eligible for overtime.
- Punching in/out can be demoralizing for employees who were previously salaried. Is there a more discreet way you can accomplish this? For example, can they clock in/out at their computer instead of at a time clock?
- Can you offer a more flexible work arrangement for hourly employees? Flexible hours are coveted, especially by Millennials.
- Is it possible for employees to work remotely? Commuting is expensive and the time spent commuting is usually not productive for your employees.
- Be transparent and explain that your company is simply complying with the law.
Above all, we recommend getting assistance as you work on FLSA classifications and staffing models. FLSA classifications are one area where HR shouldn't go it alone. We recommend working with an attorney to keep this review privileged. We've also found that when we review staffing models with clients, it's helpful to have a third party's input. Sometimes we need someone from outside of our organization to see different options and ways to structure a staffing model. We provide this service for free for our software clients, so feel free to give us a call anytime.