In May 2016, the Department of Labor (DOL) issued final rules, effective December 1, 2016, that will raise the minimum salary requirement for the administrative, professional (including the salaried computer professional), and executive exemptions from $455 per week to $913 per week. If your exempt employees’ salaries fall below this threshold, you will generally either have to:
Raise their salaries to the new requirement; or
Reclassify the affected employees as non-exempt and pay them overtime whenever they work more than 40 hours in a workweek.
Click here for an overview of these two options.
Communication Strategies:
Once you have evaluated your options, develop a plan to communicate any changes to your employees. Here are some communication strategies to consider:
#1: Act now.
Given the amount of attention the final rules have received, employees may start to ask questions about how they will be impacted. You have some time to weigh your options and make a decision. Let employees know that you are currently evaluating the impact and will notify them after you’ve assessed your options.
#2: Comply with notice requirements.
Some states require employers to provide advance notice about pay changes. For example, Missouri generally requires at least 30 days’ notice before a reduction in pay. Generally, California requires written notice of any pay change within seven days. Nevada, New York, and South Carolina require written notice seven days before a reduction in pay. Other states have different timelines, including notice at least one pay period in advance. Check your state and local law to ensure compliance. In the absence of a specific notice requirement, provide written notice as soon as possible.
#3: Develop your message carefully.
Your message will not only help employees understand the changes, but it can also help to shape their perception of the change. This is especially true for reclassified employees who may view the change as a demotion. When drafting your message, be sure to address the following:
Explain the change and its effective date
The impact on the employee
That the change is being made to comply with a new government rule
Who employees can go to with questions
Additional support that will be provided to employees (such as training on the company’s timekeeping system for employees reclassified as non-exempt)
#4: Pay special attention to reclassifications.
Many employees attach a certain level of prestige and flexibility with being classified as exempt. If you reclassify employees as non-exempt, they may see it as a demotion. You can try to address this perception by reiterating that the changes are necessary to comply with the law (and not an indication of a reduced status within the company). You may also choose to reclassify impacted employees, but continue to pay them on a salary basis. However, overtime pay is still required for all hours worked over 40 in a workweek. Additionally, explain the benefits of being classified as non-exempt, such as a potentially improved work/life balance, or receiving overtime pay whenever they work more than 40 hours per week. More often than not, exempt employees are already working over 40 hours per week and don’t receive additional compensation for this time.
Reclassified employees may also ask about:
Changes in pay: When converting their salary to an hourly wage, consider the cost-neutral approach, which factors in anticipated overtime hours.
Overtime policies: Most employers require employees to obtain authorization before working overtime. Note: regardless of your policy, all overtime must be compensated, even if it was not authorized in advance.
Timekeeping: Address the system your company uses to track time, whether or not employees are expected to punch in and out for meal periods, and exactly what time must be accounted for.
Benefits: Some employees may wonder if their benefits package is impacted by the change. Typically, an employee’s status as full-time or part-time impacts their benefits, not whether or not the employee is exempt from overtime.
#5: Train supervisors and employees.
Train supervisors so that they provide information consistent with your company’s policies and messaging. Since many exempt employees aren’t accustomed to tracking their hours, train reclassified employees to record their hours accurately. Under the FLSA, hours worked includes not only productive time (time actually spent working), but also certain nonproductive time, such as rest breaks, travel time, and training time. All of this time must be included when determining whether you have met your minimum wage and overtime obligations.
Exempt employees may also be used to working after hours, including making phone calls and checking email. Supervisors play an important role in preventing off-the-clock work. Ensure supervisors set proper expectations with their staff and that they are prepared to monitor this time. Consider controls, such as preventing access to work email outside of business hours, or requiring permission before performing work during off hours.
#6: Prepare for difficult conversations; don’t prohibit pay discussions.
The new rules may present some difficult decisions for employers. For example, if you raise the salaries of some employees to comply with the new rules, other employees may have questions about why their pay isn’t increasing or why they are being reclassified as non-exempt instead.
In an attempt to prevent discord, some employers might contemplate a policy prohibiting employees from discussing their pay with co-workers. However, prohibiting pay discussions is not permitted under Section 7 of the National Labor Relations Act (NLRA). Section 7 gives employees the right to act together, with or without a union, to improve wages and working conditions. Workplace rules or policies that could be construed to prohibit employees from discussing pay, benefits and other terms and conditions of employment could violate Section 7.
Conclusion:
Before December 1, 2016, employers will need to decide how they will comply with the new rules and communicate changes to impacted employees. Given the publicity surrounding the final rules, develop your communication plan as soon as possible.
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