FLSA Changes: Updating Your Policies and Practices
Based on the US Department of Labor (DOL) issuing a Notice of Proposed Rulemaking regarding overtime pay, many employers are reclassifying some exempt employees as non-exempt. It’s not simply about figuring out the logistics of how to reclassify employees, employers also need to consider that reclassified employees may have to follow procedures and policies that didn’t apply to them before—or that you didn’t have. Changing habits can be a challenge but changing those of your formerly exempt employees with respect to hours worked and tracked is critical to preventing wage and hour violations.
The biggest issue we foresee when it comes to dealing with timekeeping, and ultimately wage liability, is changing the habits of formerly exempt employees so that they aren’t “running the clock” after hours. They may be in the habit of responding to work email, finishing up projects, taking client calls, or engaging in other work tasks during non-work hours. It’s therefore advisable that your policies are clear about expectations and the organization’s commitment to recording all time worked by nonexempt employees.
Let’s take a look at a few of these key policies, keeping in mind the Golden Rule of wage and hour: non-exempt employees must be paid for all time they are “suffered or permitted” to work. This doesn’t just mean time in the office, but all time, whether approved by the employer or not.
It’s critical to have a policy in place that informs employees that all time worked must be tracked, that off-the-clock work is prohibited, and that employees may be disciplined for not following their scheduled shift. Please note that refusing to pay for unauthorized time worked—whether it’s regular or overtime—is not permissible.
Time a non-exempt employee spends doing work from their smartphone, tablet, or personal computer is considered time worked, and employees may find this hard to resist if their phone is chirping at them from their pocket every time a new work email comes in. For this reason, you may want to prohibit a non-exempt employee from using their personal devices for work purposes at all, or only allow such use upon authorization from the company.
Many states require meal and/or break periods for non-exempt employees. It’s important to inform employees of these breaks, explain the procedures for clocking in and out, and remind them that no work should be performed during this time.
Employees who previously worked through lunch at their desk and could put in their eight hours between 9 and 5 might not want to take an unpaid lunch period or break, thus extending their workday. State law, however, may be indifferent to their feelings. If employees ask to waive their meal or rest periods, you’ll want to check the Break and Rest Period guidelines under State Laws here.
Now is the time to ensure that you’re familiar with your state and local overtime laws. Although most employers will only be subject to the federal requirement to pay time and one-half for hours worked over 40 in one workweek, Alaska, California, Colorado, and Nevada each have daily overtime provisions, and Massachusetts and Rhode Island require some employers to pay a premium for work on Sundays and certain holidays. Employees and managers can make themselves familiar with the rules for compliance here.
You may need to consider travel time for non-exempt employees customarily engaged in work travel. There are a few narrow exceptions when travel time isn’t payable (e.g. when the employee is a passenger in a vehicle outside of regular work hours or during a standard morning/evening commute), but it’s good to assess your non-exempt employees’ travel schedules to ensure proper pay.
Incentive pay: Per FLSA requirements, overtime must be calculated weekly based on the employee’s “regular rate of pay.” Incentive pay (non-discretionary bonuses, commissions, or any other non-hourly pay) is included in the regular rate of pay calculation. For weeks in which a non-exempt employee earns both overtime and incentive pay—whether provided at the time or retroactively—you must calculate the employee’s regular rate of pay so that it includes both their base pay and incentive pay for the week. The new amount should then be used for overtime calculations.
Workweek: Every company must have an established workweek that is not adjusted or altered to avoid overtime. This is the 168-hour period during which you will track each employee’s hours to determine their pay and if they are owed overtime, e.g. Sunday at 12:00 am through Saturday at midnight. Payroll, managers, and employees should know what the set workweek is.
Netchex’s Time and Attendance system tracks hours worked by all individual employees and can send alerts when certain thresholds are being approached. If an employee is reaching overtime, managers can be notified immediately to make staffing changes.
Have questions about employee classification or what the current FLSA requirements are? Netchex has an entire HR Support Center for you to access hundreds of resources including articles, FAQs, infographics, glossaries and even an “Ask an Expert” feature.
If employees’ salaries, job duties or classifications are changed, you will need an effective tool to communicate these alterations to your employees. Netchex has an entire system for pushing out vital notices to your employees and ensuring it was received with an electronic signature requirement.