How to Deal with the New Department of Labor (DOL) Overtime Rules for Exempt Employees

The U.S. Department of Labor final overtime rule increased the salary threshold for employees who are exempt—and therefore not eligible for overtime—from $23,660 to $47,476, effective 12/01/2016. 

Employers can either increase an exempt worker’s salary so the worker remains exempt, or reclassify him or her as nonexempt. Most companies are likely to do the latter.

Telling a worker who has long been salaried, never had to punch a time card and often worked after hours about the change can be difficult.

Many employees may feel under appreciated, or as if they are being demoted, as being an exempt salaried employee holds some prestige in some workplaces.

It is important for employers to emphasize that it is just a categorization of pay and not a reflection of importance or level of contribution.

Of course, for financial reasons, many employers will be forced to change some exempt employees to hourly (non-exempt).

The deadline to comply with the rule is December 1, 2016 and employers should begin talking with workers who will be affected as soon as possible. Don’t surprise them and explain why this is happening.

Reclassified employees will now have to track their start times, end times, break times and meal times. There may be some additional training involved to get these workers used to the new procedures that are expected of them as hourly non-exempt workers.

Other things employers should think about as they make this change:

1. Do you have different levels of benefits (for example, paid time or or vacation accruals, disability or life insurance) for exempt and nonexempt workers? If so, that will have to be communicated as well.
2. Managers should be clear about the schedules that reclassified employees will work. If the department or company does not allow OT, reclassified workers may need additional direction in adjusting their work hours so all of their is completed.
3. What is your policy for non-exempt workers to take company phones and laptops home? Managers should be very clear about what types of work are authorized outside of normal working hours; how much time is authorized; and the necessity of recording all time worked.
4. Companies will also have to consider whether to allow reclassified employees to travel, and how to pay workers for travel time.

With HR staff planning, employee productivity and morale need not suffer as you communicate these changes to your reclassified employees.

For additional information, please view our Special Alert and the DOL New release  

Lauren Sims, a Principal HR Consultant with eqHR Solutions, prepared this article.

For transition assistance with the new DOL regulation or navigating the ever-changing landscape of California Employment Law?  Call today for a no obligation consultation with an HR Professional.

eqHR Solutions provides tactical and strategic human resources support for businesses in Southern California and the San Francisco / Bay area.