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A rule proposed by the Department of Labor (DOL) would make overtime pay available to an additional 3.6 million workers.
The proposal, which was released Aug. 30, would extend overtime to salaried employees in executive, administrative, or professional (also known as “white-collar”) positions who earn less than $1,059 per week, or about $55,000 annually. The Obama White House proposed a similar rule in 2016 that was ultimately dropped by the Trump administration.
While the proposal is likely to be challenged in court, reported SHRM, HR pros should review workers’ hours and classifications now so they’re prepared to comply with the rule should it take effect, one expert told HR Brew.
Which workers will be owed overtime? Under federal law, salaried white-collar employees are currently exempt from receiving overtime pay unless they earn less than $35,568 a year.
Certain states—such as California, Washington, and New York—already have minimum salary thresholds for overtime in place that are higher than the $55,000 threshold proposed by the DOL. In California, for example, non-exempt employees are entitled to overtime if they make less than $64,480. Employers in these states are thus less likely to be affected by the proposed DOL rule, said Kara Govro, principal legal analyst with Mineral, an HR and compliance firm.
Still, employers in sectors that tend to hire low-wage, salaried workers should pay special attention to the DOL rule. Agriculture, leisure and hospitality, and public administration are among the industries with the highest shares of workers potentially affected by the proposed overtime requirements.
How HR can prepare. There are three steps HR can take now to prepare for potential changes to the DOL’s overtime protections, Govro told HR Brew:
Track employees’ hours. If salaried employees currently exempt from receiving overtime haven’t been tracking their hours, ask them to do so. This will help HR determine how the DOL’s proposed rule would affect their budget, should a share of their employees become entitled to overtime.
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“If they’re actually working 15 hours a week of overtime, and you don’t realize that…all of a sudden, they’re gonna make a lot more money that you had not budgeted for,” Govro said. Salaried employees are likely not accustomed to tracking their hours, so it’s important to explain why they’re being asked to do so, highlighting potential overtime changes on the horizon, she added.
Prepare to reclassify employees if necessary. If employers can’t afford to bump up certain salaried workers’ pay to keep them exempt from overtime, they’ll need to reclassify them as hourly employees, Govro said.
Should employers decide to reclassify their employees, they’ll need to be trained to act as non-exempt hourly employees. This might mean using a timekeeping system and observing overtime policies, such as taking lunch breaks. If a company needs these workers to keep clocking in more than 40 hours a week, they’ll need to up their pay, Govro said. If they can’t pay the overtime, they’ll have to redistribute work, she added.
The subject of reclassification can also be delicate, Govro said. She recommended writing a letter to employees explaining why they’re being reclassified, and offering to let them keep certain aspects of their job, such as managing people. “Trying to communicate that without bruising egos will be necessary,” she said.
Pay attention to effects on worker morale. Should an employer adjust certain workers’ salaries in response to the DOL rule, that could have an effect on broader employee morale, as well as pay equity, Govro said. Paying attention to the impact these changes have on the rest of the organization will be important.