Businesses that choose to neglect the specifications of the ruling and the knowledge of the employees might end up with a large segment of misclassified salaried, non-exempt workers who earn less than $47,476. These individuals will now be supported to seek legal redressal if they are not compensated for time beyond the 40-hour work week, leading to disputes.
2. Any course of action you choose to implement should be sustainable and financially feasible. A detail that most SMBs are glossing over is the automatic threshold revision scheduled to happen every three years—starting January of 2020. The reason behind this decision is to catch up with inflation and respect the sentiment of “fair pay for hard work”.
Companies that wish to increase the salary of employees who are “non-exempt” to take them beyond the threshold need to brace themselves for a number of undesirable consequences like forced pay hikes every three years and dissatisfaction of workers who earn slightly more than $47,476 annually and thus may feel left out of the compensation revision.
3. You have limited time to comply with the new overtime protection rule. Any strategy that you go with must be fleshed out, considered for sustainability and then deployed by December 1, 2016. Workers who will be reclassified because of the decision will also need to be briefed of new duties and given time to regain optimal productivity. The adjustment is bound to be hectic, especially for small and medium-sized businesses that have a lot to take care of and limited resources.
4. You can still have workers with flexible schedules. Good news! No regulation of the 2016 overtime protection rule restricts worker flexibility in any way. Employees are not required to stay tied to their desks. They do not have to punch in-out clocks, and they can even telecommute. The only non-negotiable mandate pertains to tracking the number of hours spent working for the employer.
5. The one and a half overtime pay rate will have a major cumulative impact. If you are paying an employee about $20 an hour and this individual didn’t qualify for protection prior to the new ruling then after December 1, 2016 he/she will be entitled to an overtime wage rate of (1.5 x $20) $30. Even if this worker puts in only an hour of overtime every week, in 4 weeks he will earn an extra $120. This translates into $1.5K a year! Now compound this number to account for multiple individuals and you have to get very particular about how you use the 40 regular hours available.
In conclusion, not following the provisions isn’t an option. Most legal and labor experts concur that the government has left almost no room for misinterpretation. Businesses that choose to disregard the revised overtime thresholds and operate with misclassified employees might be required to pay two years’ worth of salary in back wages and liquidated damages equal to the unpaid sum.
Todd Waletzki is chief operating officer, payroll for BenefitMall, a national provider of employee benefits, payroll, HR and employer services.