The Department of Labor will be releasing new regulations in the next few months regarding overtime pay. Now is the time to understand the current law, because you’ll likely need to make some changes with your branch staff and lower paid salary positions.
The Fair Labor Standards Act (FLSA) is specific in regards to receiving overtime pay. This is one of the biggest confusions we see with our clients in terms of wage and hour laws. Just because an employee works in a “white collar” office position does not mean they should not receive overtime (OT). To qualify for exemption from OT pay, employees generally must meet certain tests regarding their job duties and must be paid on a salary basis at not less than $455 per week. Job titles do not determine exempt status. In order for an exemption to apply, an employee’s specific job duties and salary must meet all the requirements of the Department of Labor’s regulations. The current FLSA exemptions are listed on the Department’s website.
Do you have job descriptions?
The easiest place to start in reviewing your jobs for OT exemption is using the job description. If you don’t have job descriptions, now is time to draft them. If you’re writing down all the job duties of a position to compare against the regulations anyway, you might as well create the job descriptions now. Then, you can compare your job descriptions against the exemptions for executive, administrative, professional, computer and outside sales employees. It’s likely that most of your branch staff (recruiters, placement professionals, etc.) other than managers will fall in the administrative exemption. The most troublesome test in the administrative exemption is the requirement that the employee’s primary duty includes the exercise of discretion and independent judgment with respect to matters of significance. What does that mean?
Discretion and Independent Judgment
The employee must have the authority to make major decisions with independent choice. This means that they are not following procedures or established techniques when making decisions and don't have to ask permission from a manager with each decision. In terms of your branch staff, like recruiters, you’ll need to evaluate their authority level. Do your branch staff positions have the authority to make hiring, placement, and termination decisions on their own, on the spot? Do they have the authority to interpret and deviate from management policies without getting approval from a manager? If the positions do not have true independent judgment, then those positions are likely not eligible for overtime exemption.
What’s changing? And, how will it affect your branch staff?
Well, we don’t know exactly what will be changing with the FLSA regulations. But, there is some talk about a quantitative duties test, which would require employees to spend at least 50 percent of their time in exempt work in order to be classified as exempt. In this case, you would not only want a job description but a notation of the percentage of time spent on each duty that is exempt. There is even more serious talk that the salary duties test will increase significantly. Right now the salary requirement is $455 per week, which equates to $23,660 annually. There is debate on raising the salary requirement to at least $42,000; but some lawmakers are pushing for $50,000 or even $69,000 limits. Again, at the very least, we’re likely to see the requirement increase to $42,000.
Now is the time to take a look at your positions that you currently classify as exempt to ensure they really meet the OT exemption. Consider whether the majority of the positions time is spent in exempt duties. If you’re exempt positions are not currently at the $42,000 salary, evaluate how OT pay on all of those positions will effect your bottom line.
Do you need assistance with your Human Resources policies and practices? Contact us. We would love to help you (avoid the DOL knocking on your door ... no, really)!