By now you all have learned that a Texas federal judge passed a preliminary injunction to halt the overtime rule scheduled to become effective December 1. As much as I want to help you celebrate, I must instead remind you that this latest turn of events affects the salary threshold ONLY; if your salaried-exempt employees do not meet the duties tests, then your exposure still exists.
If you are unsure about what a “duties test” is, you are not alone. So much focus has been placed on the unreasonableness of increasing the minimum salary threshold from $23,660 per year to $47,476 per year (or changes to the highly-compensated threshold from $100k to $134,004k) that no one has been talking about the other very real (and less easy-to-understand) requirements: the duties tests.
Employees cannot (under existing or new regulations) be permitted to be exempt from overtime just because they work in an office, have a fancy title, handle the books or make some decisions regarding changes to estimates or pricing. The reality is that job titles have absolutely nothing to do with whether or not a person can be exempt from overtime and having authority to change pricing is not necessarily considered significant enough when determining a salaried classification.
While the duties-tests have been around for years, the duties definitions can be confusing (even the Department of Labor had to settle a $7m lawsuit in August for misclassifying their own employees). This is especially the case for employers who attempt to review job descriptions without the aid of an outside resource. Employers are more prone to forcing the duties tests to meet the exemption definitions rather than taking an objective view of whether the duties actually qualify for the exempt-status. This costly and potentially catastrophic situation occurs because employers have a hard time separating the potential overtime costs from the need to reclassify the employee.
I promise, whatever you spend for a consultant is much less than you would spend for the inevitable wage and hour lawsuits; unfortunately, I have seen the devastating reality of misclassification.
President-elect Trump will likely make some changes to the threshold requirements for small-businesses (which is typically defined as 50 or less belly-buttons), but having been in human resources for two decades I can tell you, changing the threshold will not fix the issue your organization may be facing and thanks to Obama’s new overtime initiative, your employees and their partners/spouses are much more educated as to what constitutes an exempt employee.
This injunction is temporary so I urge you to continue to educate yourself on the duties requirements so that you can reclassify your employees where necessary before it is too late.
To learn more, I would like to invite you to my highly educational seminar on December 13, 2016 at 8:00 a.m. – 11:00 a.m. at Memco (10876 Hillpoint Drive, San Antonio, TX 78217).
During this seminar you will receive valuable information about classification that extends beyond the threshold. You will learn:
- How to survive the new regulations without killing your budget
- How to communicate reclassification without begging employees to sue you for past misclassification mistakes
- How to review your employee classifications
- What changes you should make to your handbook
- Determine what changes will need to be communicated to the individuals you reclassify from salary to hourly status
- Clocking in and out requirements (and how to report time accurately to keep you out of the weeds)
- How to determine your exposure with 1099 subcontracted employees, travel pay requirements, training and education pay, and so much more
Please RSVP at firstname.lastname@example.org or via phone at 210.846.4900 by December 12, 2016 as seating is extremely limited. The cost is $45.00 and can be paid via check on the date of the seminar or via PayPal at email@example.com .
On Thursday, March 13, 2014, President Obama signed a Memorandum directing the Secretary of Labor to update the regulations that dictate “white collar” overtime exemption rules to (as stated by the President) “make overtime exemption rules easier for employers to understand.” These new easy-to-understand set of rules (that took the Department of Labor well past the original deadline of November 2014 to draft) were finally sent to the Office of Management and Budget (OMB) for consideration on May 5, 2015.
Even though the new changes will likely cause some form of acid-reflux for employers, the current rules can be difficult to understand and the requisite salary level of $455 per week is low by today’s standards.
Under the current rules, employees must meet stringent criteria to qualify for exempt-level status. Most of the positions are required to receive a minimum salary of $455 per week and carry several specific primary duties. Administrative professionals, for example, must perform non-manual office work that is related to management or general business operations of the employer or employer’s customers (as their primary duty), AND must exercise of independent judgment and discretion about matters of significance as a primary component of the position. In other words, if your receptionist or secretary is a salaried-exempt employee, you are likely already in violation of the law.
The Department of Labor (DOL) chose to focus on two main areas for their revisions: modifying primary duties requirements (such as nonexempt duties having to be less than 40 to 50 percent for a worker to still be classified as exempt) and raising the minimum salary levels to $42,000 to $61,000, annually.
As with most new government regulations, employers should be ready to feel immediate consequences should they choose to ignore the ruling which is scheduled to be finalized in about eight weeks. As it stands now, wage and hour claims are already the fastest growing area of class litigation today.
Employers found guilty of mis-classifying employees as exempt from overtime could be required to pay employees back wages for up to two years of overtime (three if the employer is found guilty of willfully violating the statutes); employees may also be awarded an equal amount as liquidated damages. Furthermore, employers can expect to pay additional penalties of up to $1,100 for each violation.
Finally, I cannot stress enough that titles have little to do with determining whether or not an individual qualifies to be exempt from overtime. An individual can have a management title but still not be permitted to be a salaried exempt employee.
What to do Next…
For employers still trying to unravel and recover from the mysteries surrounding penalties and financial requirements for the Affordable Care Act, this is not good news. But we will NEVER present you with a challenge without having a solution. Ask Linda HR is ready to help you:
1. Conduct interviews with your salaried exempt level positions and review your job descriptions to ensure the positions can indeed be exempt from overtime
2. Ensure your employees understand his or her duties well enough that they can correctly answer the DOL’s questions should you become the subject of an audit or lawsuit
3. Review and make recommendations regarding your timekeeping procedures. REMEMBER: the DOL is likely to side with employees who assert he or she worked overtime and you are unable to prove otherwise
4. Review your clock-in/clock-out policies in your current employee handbook to include strategies to effectively deal with violations of your policy
Job descriptions are difficult, tedious and usually the most dreaded business task; giving this over to a professional can save you time, money, and certainly, ulcers and once this final rule is announced, it is very likely that employees will seek some type of relief for their individual situation.
Ask Linda HR Consulting Services is here to help! Contact Linda at 210.846.4900 for your free assessment.