Employers are expecting huge changes to their workplace pay and culture as they gear up for the U.S. Department of Labor’s new overtime rule.
The rule, which takes effect Dec. 1, will make about 4.2 million more workers eligible for time and a half pay for hours worked beyond a 40-hour week. That’s because under the rule workers earning less than $47,476 a year will be eligible for overtime compared to now where workers making more than $23,660 don’t qualify for overtime.
The rule makes stronger existing overtime protections for 5.7 million additional white collar salaried workers and 3.2 million salaried blue collar workers, the DOL website notes. It also requires automatic increases of salary and compensation levels every three years and permits employers to use “nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10% of the new standard salary level,” according to the DOL.
“There’s going to be a lot more pressure on employees to manage their time” to not exceed the 40 hours that would trigger the overtime requirement, Robert Boonin, partner at Detroit-based law firm Dykema, tells Bloomberg BNA.
Human resource professionals should hone in on ensuring “that employees who are now non-exempt who used to be exempt understand how [the rule] applies to them,” Nancy Hammer, senior government affairs policy counsel for the Society of Human Resource Management, told Bloomberg BNA. Many “exempt employees don’t record their hours at all,” so newly non-exempt employees may have to be taught “to do things differently,” she notes.
But employers also will feel pressure to consider changes to the workplace that ensure employees don’t clock in more then 40 hours a week. This won’t be an easy task with employees and their bosses having become so accustom to working at all hours because of remote accessibility.
Employers will have to examine how many employees, who will no longer be exempt from overtime, have remote access, Jonathan Keselenko, partner at Boston-based law firm Foley Hoag, tells Bloomberg BNA. “I think some employers may cut that off (remote access) entirely,” Keselenko says.
Employees subject to the new overtime requirements may have to start using a time clock, while their bosses will have to refrain from texting and emailing them “at all hours,” Keselenko says. “You’re going to have to retrain a lot of people in how they act,” he notes.
Employers also will have to ensure employees earning near $47,476 are reclassified to non-exempt status, he adds. The overtime threshold is expected to go up to $51,000 by 2020, he notes. But employers are not off the hook for employees making more than $47,476 if workers responsibilities don’t rise to the level of professional or managerial–the so-called duties test, Keselenko says.
Non-profits and universities also will have to deal with the new overtime requirements and some say it will hit them harder than the private sector. For the University of Kansas, the new requirements mean 354 employees now exempt from overtime requirements will be eligible, The Business Journalsreports.
The school would owe close to $3 million to these employees by raising the salaries to the new overtime threshold. If the school opted to pay each of the 354 employees overtime for five hours a week, it would cost $2.3 million a year. “Neither of these options is currently financially feasible,” Michael Rounds, the university’s associate vice provost for human resources management, said in testimony at a house hearing this month (PDF).
Easter Seals HH, a non-profit, would have to reclassify 280 employees, says Tina Sharby, chief human resources officer. With a tight budget, the organization “will have to reduce services and care for clients, mostly with individuals with disabilities–already a vulnerable and underserved population in the country,” Sharby testified at the house hearing (PDF).
But Jared Bernstein, a former economic advisor to the Obama Administration, says only a small percentage of university and non-profit employees will be impacted by the new overtime requirement, The Business Journalsreports. He pointed out that 140 nonprofit organizations have signed a letter of support citing the new requirement as “a great victory for working people across the United States.”
Additionally, “the pay and work-family balance of workers at nonprofits are no less important than the pay and work-family balance of workers at for-profit institutions,” says Bernstein, now a senior fellow at the Center on Budget and Policy Priorities.
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