By Anna Brewer, Director of HR
Administrative Compliance, Insperity
By now, most companies are likely aware
of the Fair Labor Standards Act (FLSA) overtime rule change scheduled to take
effect on Dec. 1. According to White House estimates, the
change will make 4.2 million
additional salaried white-collar American workers eligible for overtime pay.;
however, what many California business owners might not know is how, and to
what extent, the new rules specifically impact them.
Here
is a brief summary of the situation: Under the old federal rule, generally
white-collar employees were required to receive overtime pay if they made less
than $455 per week, or $23,660 a year. Effective Dec. 1, the minimum salary
level will increase to $913 per week, or $47,476 annually. In addition, workers
classified as “highly compensated employees” must now be paid at least $134,004,
rather than the current $100,000, in total annual compensation; and hold
non-manual labor jobs to be automatically exempt from overtime. The rule change
also establishes an algorithm, based on economic factors, which will be used to
determine future adjustments to the minimum salary requirement.
How
will California companies be affected? Because
California has its own set of regulations — which include a state minimum wage
higher than the federal minimum wage and mandated overtime compensation for
people who make under $41,600 per year — fewer California workers on average, will likely be impacted by
the change compared to other states. According to the Department of Labor
(DOL), an estimated 146,000 workers in California fall between the state’s
salary threshold and the new, higher federal standards.
So
what can California companies do to make sure they remain in compliance? Here
are a few tips:
- Determine the Impacts Now — It’s a must for all companies to be keenly aware of how many employees on their payroll will be affected when the new rule is enacted. Now is the time to review job duties of employees identified as being impacted by the rule change.
- Better Software May Solve Problems — Dependable and accurate hourly tracking systems are a must in California where state and federal labor laws often overlap. Employers will need to manage new time-keeping responsibilities for employees reclassified to nonexempt status. Companies should consider electronic solutions that allow workers to clock-in and clock-out using mobile devices to decrease the administrative burden associated with other methods such as manual time sheets. Companies should also recognize that the common practice of checking emails after hours on smartphones could also impact hourly totals. Nonexempt employees are required to be compensated for all the time they have worked, including time spent on work emails at home or during the weekend. Company email policies should be revisited in light of this risk.
- Ask Broader Policy Questions — Work email policies are only part of the picture. All related company policies should be thoroughly reviewed prior to implementation of the rule change. For example, are employees required to obtain written permission from an authorized manager prior to working overtime hours? Are employees required to acknowledge their timesheets? If this is not the case, a policy revision may be in order to improve both tracking and control of overtime costs. It should be noted that a policy requiring permission to work overtime is valid, but if an employee works extra hours without permission, overtime must be paid although the employee may be disciplined for not following the policy.
- The Importance of Communication — Once company officials have a firm grasp on the impacts of the new overtime rule, it is time for some internal communications. Managers should proactively communicate with the affected employees. They need to be prepared to answer questions and explain any company policy changes that will be implemented as a result.
- Salary Adjustments Might Make Sense — Many impacted companies may decide to make pay adjustments for employees with salaries near the cap. Due to overlapping state and federal regulations in California, it is likely many companies will make these alterations. Doing so could reduce some of the timekeeping complexities the law might create; however, employers must also recognize that pay increases alone do not guarantee exemption from the new overtime rules.
For more information, call 855-677-0402 or visit http://www.insperity.com/cba.