On May 18, 2016, the U.S. Department of Labor (DOL) released a long-anticipated final ruling on the overtime pay regulation under the Fair Labor Standards Act (FLSA). The final ruling will significantly alter current pay structures for employees and have a large impact on small businesses. The current salary threshold for exempt employees is $455 a week ($23,660 per year). Effective December 1, 2016, the newly revised salary threshold will be $913 a week ($47,476 per year) for full-time exempt employees.
Creative Business Solutions (CBS) published an article regarding these changes in our newsletter and blog on May 26. The next question we want to address is, how does a business owner or manager approach the conversation of transitioning an exempt employee into a non-exempt status?
After first analyzing job descriptions and salaries of exempt employees, the decision must be made to either raise salaries to meet the exempt status or transition exempt employees who are below the new salary threshold to a non-exempt status. What does the conversation look like for the employee being transitioned to an hourly employee? Below are steps and action items to consider when making this transition in FLSA status:
1. Start the conversation early (now). Create dialogue to educate managers and supervisors on the changes in regulation as they are the first line of communication.
2. One way to begin this discussion with employees is to help them understand the benefits of the transition from exempt to non-exempt as a positive rather than a negative. For example:
a. Employee work hours will now be finite.
b. Employees could see an increase in work-life balance.
c. Since the DOL now considers replying to work emails or answering phone calls after hours to be time spent working, non-exempt employees may not be required to work after hours and they may begin to feel an increase in personal time.
3. Determine whether communications about the final rule will be in one-on-one meetings, small group meetings, large group meetings, memos or a combination of approaches. It will be important to formulate a plan of action to increase effectiveness in conversations and strategies in communications.
4. Train managers and supervisors how to manage non-exempt employees. For example, begin to manage overtime hours worked and workloads of non-exempt employees. In addition to managing overtime, avoid encouraging working after hours as this will result in overtime pay.
5. Verify whether state wage notification laws require a notice of any change in pay and what is required to be sent to the employee regarding a change in pay. In Kansas, prior to an employer changing an employee’s rate of pay the employer must give advanced notice.
6. Train non-exempt employees how to track time and report time accurately in accordance with company policies and procedures.
7. Work to maintain and manage employee morale.
a. Some employees may view this transition from exempt to nonexempt as a demotion. Communication with employees will be important during this transition period. Having candid conversations informing employees that any reclassification is not a direct reflection on an individual’s value, quality of work or his/her contribution to the success of the organization.
b. Emphasize that the reclassification was a merely a result of the changes in DOL regulations and the organization will actively work with employees directly affected to ensure the transition is successful and positive for all involved.
In conclusion, the changes in FLSA regulation can be difficult and frustrating to implement but they do not have to be devastating to employees or employers. By educating employees and management on the implications and benefits of the new regulation, employees may feel a sense of understanding and acceptance in this new transition from exempt to non-exempt.
For further questions, please contract Creative Business Solutions (CBS) so we may assist you with determining the best course of action for your organization with respect to the new FLSA overtime regulation. CBS can also assist with the evaluation and determination of appropriate FLSA classifications for the various positions in your organization. Please call us today so we may ensure your management and employees are prepared for the changes in the FLSA overtime regulation.