For most business owners “overtime” is a bad word. It is expensive and an area often taken advantage of by employees. A few hours of overtime can make a very positive difference in your employee’s paycheck while at the same time making a healthy dent in your bottom line. Most employers, rightfully so, make an effort to control overtime and to minimize how much is being paid. But, caution must be exercised when trying to avoid paying overtime because some laws may be changing and you could be caught paying huge fines and penalties for not complying.
The Fair Labor Standards Act (FLSA) governs many aspects of the employee/employer relationship, including overtime and the distinction between exempt and non-exempt employees as it pertains to overtime eligibility. The US Department of Labor (DOL) is responsible for enforcing this act and there are a couple of pending items that you, as an employer, need to keep an eye on.
Potential Changes – More employees due overtime
A couple of current workforce payroll issues are making employers nervous about increased liability for unpaid overtime. The U.S. Department of Labor (DOL) has proposed rules to broaden federal overtime protection for employees and employers are watching for an upcoming ruling in an overtime pay class-action suit against the Chicago police force regarding the use of smartphones while off duty.
The FLSA white-collar exception from minimum wage and overtime pay rules applies to certain employees paid over $455 per week or $23,660 per year. The proposed change to those rules includes a change to apply to employees who earn at least $50,000 per year, meaning many more employees will be due overtime pay than are currently. The proposal also includes automatic increase to the salary threshold tied to inflation and possible changes to the duties tests.
What Does This Mean to You?
If this DOL proposal becomes law, you may be responsible for paying overtime to more employees than you were before or need to change work requirements. Particular areas of interest will be on-call requirements for non-exempt employees as well as employee titles and work duties of those who normally fall outside of FLSA overtime rules. This includes a big area for many businesses, outside sales representatives. Strict attention will need to be paid to the duties test of the exemption from overtime eligibility as well as availability for work responsibilities while off-duty.
How to Prepare Now
We always advise our clients to adhere to a strict policy on overtime but don’t just take our word for it. Linda Doyle, a partner in the Chicago office of law firm McDermott Will & Emery, and class action lawyer Paul Geiger, recommend a “well-drafted and enforced policy on overtime.” It’s an important factor in managing overtime issues and avoiding legal problems. They say, “training supervisors about the company’s overtime obligations is also important to make sure employees aren’t called in outside their regular full-time schedules unless there is a real business need and they are paid correctly.”
Doyle reminds employers that, “they incur liability if they have employees they think are exempt but aren’t.” She says she’s had clients who “classified their outside sales reps as exempt but found that they didn’t pass the duties test for exemption because of the actual work they performed.”
Bottom line? Have a policy for overtime and stick to it. Be very careful when classifying employees because the money you save now could be erased when the fines and class-action lawsuits start being filed.
How PAYDAY Can Help
Our expert staff and HR partners can help you stay current with the laws as they pertain to overtime (and all other aspects of your human capital management strategy) and help keep you in compliance. Our staff is well trained and our solutions are constantly updated to stay current with ever changing labor and legal environment.
If you have any questions about the information in this article or any other human capital needs, feel free to give us a call at (714) 467-3434.