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How do we explain the need to change the FLSA overtime exemption?

by Jo Ellen Whitney

This summer, the U.S. Department of Labor (DOL) indicated that under new Fair Labor Standards Act (FLSA) regulations issued in May, it might be necessary for various employers to change some workers’ overtime exemption. In a blog post on the DOL website, the agency also indicated that employees would be thrilled with the exemption change. The post appears to have been written by little pink fairies who were primarily interested in scattering pixie dust on the problem. However, it was an interesting counterpoint to news coverage with a clearly post-apocalyptic vision of the changes, more like a scene from Mad Max than your standard business environment. It is possible that employees could be thrilled, and it could all be cupcakes and roses. But it’s also possible that they could be incredibly upset about losing the “flexibility” that goes along with being an exempt employee. Time will tell. Regardless, here is what you should do to implement the changes. 

Clear communication
Changing the overtime exemption will require regular and consistent communication with your employees. It would be hard to imagine employees were not already aware of potential changes in the DOL rules since they have been trumpeted from every media outlet in bold letters, all caps, typically printed in red and covered in glitter. Further, you should have coordinated a time study with your employees to determine what their essential job functions are and how much time is being spent on each of these functions.

If you have gone through this process and obtained employee input, employees will be aware that you are assessing the workforce and their exemption status. During this process, various problems can occur.

What happens if an employee says, “It’s clear I am not exempt, so you need to switch me over right now”? Although it is possible that you have made an error in prior exemptions—and if so, this is the time to correct it—an orderly plan to address issues is needed. Some employees may want you to correct a misclassification immediately so they can begin collecting overtime. You certainly could do that as soon as you determine that the misclassification occurred, but it may be necessary to set a deadline for shifting all employees. You would explain to employees that the process is ongoing and provide the date for final assessment and changes. By doing this, you are providing both notice and a plan. Given the wholesale changes caused by the new rules, it is to be hoped that the DOL will be accepting of the need for ongoing assessment rather than being punitive as prior mistakes are discovered.

Inform employees that you are in the process of assessing the entirety of your job classifications, that the evaluation will be completed by a certain date (determined by you), and that by this date, with the assistance of their input, you will make final category determinations.

What if an employee doesn’t want to change?
At various times, the DOL has made wholesale changes in the exemptions for employees. This includes paralegals, people who work from home, and social workers who are not licensed independent social workers. Many employees, particularly those who previously believed they fit within the professional exemption, may not want to shift exemption status because they have a certain amount of flexibility in their work schedules.

Shifting an employee who has previously had a great deal of independence to determine her own schedule will require ongoing education and discussions. She needs to be made aware of the processes used to track time and the importance of keeping accurate time records. Many employees may already keep time records of some nature to bill on a case or client basis, and one way to work through this problem with them is to tie it to the types of timekeeping they have already been participating in.

In addition, work with employees to maintain flexibility when it’s pertinent or important. Hourly employees can continue to have a certain amount of flexibility within their workday. If an employee travels to various sites but perhaps has two hours off in the middle of the day to go to her child’s baseball game, she can simply clock out for the baseball game time frame, picking up other hours if she works later in the day. Another possibility is to build in an additional amount of paid time off, such as a day or two, to help employees in a newly nonprofessional category feel as if they still have some extra time or flexibility and ease their transition into the new nonexempt category.

Create a plan
Anytime you are changing categories or any work function, it is always best to have a plan:

  1. Gather employee input on job classification categories and actual job duties.
  2. Assess the categories in conjunction with work expectations, as well as the information provided by the employee to determine whether exemptions may apply.
  3. Communicate the plan to employees and make them feel included so they know things aren’t being ignored and their input had value.
  4. Train employees on how time will be recorded, what needs to be done, and any new expectations you may have about their duties. It is certainly possible that employees can be shifted from the nonexempt to exempt categories once you have completed essential function assessments. Tell the employees what to expect as you are moving forward.
  5. Set a firm date when you make the changes and tell employees when the exemption shift will occur, typically at the beginning of a pay period, and what to expect in terms of changes, if any, in their take-home pay.
  6. Build some time in for transitional issues. Employees who have always been exempt are going to have some difficulties remembering when to clock in and when to clock out. You can anticipate long discussions about why they have to clock out and take paid time off when they are going to be gone for two hours. Build some time in for training and dealing with frustration.

Bottom line
As with any regulation change where there has been a great deal of media coverage, much of it inaccurate, clear and ongoing communication with your employees is the key element to success.