The recent proposed change in laws regarding overtime exemption is expected to affect more than 4.6 million workers — a wake-up notice for small businesses that rack up a lot of overtime hours. Please see this month’s Legal Watch column for more details on the Fair Labor Standards Act (FLSA) and the exact rules, or consult http://www.dol.gov/whd/overtime/NPRM2015/factsheet.htm.
One common trait of small businesses is the willingness of employees to work long hours in order to make a project succeed — and overtime pay can become a real factor here. This gets even worse if there is a problem like a personal crisis — even if you prepare for that, overtime rules may go into effect when others pick up the slack.
You will also want to consider whether or not money is a good motivator. Not all employees at a small business want to have a lot of overtime. Reviewing your employees’ motivations will be important in redesigning workflows and assignments.
It is not just the big businesses that need to pay close attention to changes in labor laws — every small business needs to understand the risks involved with non-compliance. It is often more cost-effective for a small business to comply than to break the law and get caught doing so. Ultimately, of course, the proposed regulations mainly affect businesses that have a lot of overtime hours. If multiple employees are constantly staying at the office well beyond normal working hours, the new regulations could take a big bite out of your profits. You may find that is it more affordable to hire a new employee than to keep paying overtime.
Common Questions
If I pay my employee $50,440 or more, does that alone automatically qualify her as exempt from the FLSA’s overtime rules?
No, not automatically. If you pay her less than $50,440, she will automatically qualify for overtime, but if you pay her more than $50,400, she still must satisfy the duties requirement of the exemption. So, for example, if you pay your receptionist $51,000, her income level qualifies her for the administrative exemption, but if she is responsible only for answering phones, opening mail and greeting customers, her duties do not qualify her for the exemption. So even with a salary that is higher than the threshold, in this example she would still qualify for overtime pay if she works more than 40 hours in a week.
Does that mean I have to either bump everyone up to $50,440 or make them punch a clock?
Yes and no. If you want them to remain “exempt” and not eligible for overtime and you are confident they satisfy the duties requirement of the FLSA (for example, they truly perform management duties or they truly perform executive-level functions), then yes, they need to be paid at least $50,440 to keep their status as exempt. However, if you do not want to increase their salary but you also do not want them to “punch a clock,” you can keep paying them on a salary basis below the threshold level, but you will need to reclassify them as non-exempt and have them report their time each pay period. If they report that they worked more than 40 hours in a week during that pay period, you must pay them time-and-a-half overtime for any excess hours.
Does my [X] position qualify for the FLSA Exemption?
Unfortunately, it is impossible for us to say without individual evaluation; however, in our experience, most customer service positions would not qualify as “exempt.” Does that mean that all customer services positions should be non-exempt? No. Occasionally, but only occasionally, we have identified CSRs who would qualify as exempt based on their duties. If you are uncertain, you are STRONGLY advised to seek counsel, either from your lawyer, accountant or an HR consultant.
Get Assistance
As a special offer to SD&I readers, if you need help navigating through the new DOL overtime regulations, MJ Management Solutions can help with our HR Solutions program. Call for a no-cost 30-minute consultation at 480-924-6101 or email [email protected].
Margaret Jacoby, SPHR, is President & Principal Consultant of MJ Management Solutions Inc., and Claudia St. John is President of Affinity HR Group - both strategic partners of the HRGroup, a provider of Human Resource support services, including hiring practices, compensation programs, talent development and more. For additional info, or to suggest a topic for a future article, please email [email protected].
