HR Must Determine Overtime Strategies, Communications ASAP

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By Genevieve Douglas

Oct. 31 — As the Dec. 1 effective date for the Department of Labor’s overtime rule approaches, human resources departments should be well on their way to implementing strategies for compliance and communicating those changes with affected employees, attorneys and former DOL officials say.

The DOL rule will make as many as 4.2 million more workers eligible for time and one-half their normal pay when they work more than 40 hours in a workweek. The rule doubles the salary threshold below which employees qualify from $24,660 per year to $47,476 per year, and adjusts every three years for inflation.

The main challenge for many HR departments preparing for the overtime rule is that strategies to comply are “discretionary,” Michael Hancock, the former assistant administrator at DOL’s Wage and Hour Division, told Bloomberg BNA Oct. 28.

HR will need to analyze employees on an individual basis to consider their options, such as whether to pay someone a higher salary to remain exempt, Hancock said.

These aren’t specifically regulatory decisions that they will need to make, but rather the kinds of salary decisions “businesses make every day,” according to Hancock. “It’s the kinds of things that HR is uniquely situated to modify,” he added.

Management-side attorneys, however, say that employers are concerned that the regulation will require extensive changes.

“There’s been plenty of concern being raised by many sectors due to the fact that there will be a significant impact to employers beginning in 2017,” Pamela Williams, a partner in the Houston office of Fisher Phillips, told Bloomberg BNA Oct. 31.

Williams also recommended HR professionals begin by analyzing who will be affected, either because they are misclassified or will need to be reclassified to contain escalating labor costs.

Potential HR strategies

Williams recommended managers begin compliance with the overtime rule by compiling a list of exempt positions within their organization, examining both the salaries and duties of the employees in questions.

HR and legal counsel should analyze job descriptions, job titles and information on how these employees spend their day, she added. Williams noted that she frequently finds that employees may not necessarily be performing duties that are commensurate with their titles. “A manager can mean many different things within different organizations and different industries,” she said.

From that analysis, Williams said, HR and employers have a range of options for a compliance strategy, including:

  •  increasing salaries to maintain an employee’s exemption;
  •  reclassifying employees and paying them overtime;
  •  decreasing workloads or hiring additional employees;
  •  adjusting work schedules; and
  •  spreading work hours to remain below 40 in a workweek.

Potential additional issues could arise for mid-level managers that were previously exempt but are now nonexempt under the new threshold, Williams said.

Solutions to address those problems include restricting telecommuting or the use of smartphones. “Where there was flexibility in the past, there may not be due to the regulations,” she said.

Communicating Changes Is Key

Regardless of the compliance strategy an employer pursues, one of HR’s key roles will be communicating that strategy, and the subsequent changes, to employees, Hancock and Williams agreed.

Tammy McCutchen, a principal at Littler Mendelson PC in Washington and former Wage and Hour Division administrator under President George W. Bush, recommended HR departments be prepared for the most common questions, and draft and distribute FAQs to management “so that everybody is on the same page.”

It’s a good idea to spend time on these talking points and FAQs and come up with a game plan for who will communicate, when that will happen and what will be said, McCutchen told Bloomberg BNA Oct. 31.

Employers should also be aware that many states require certain time frames for communicating pay changes, she added.

Another issue McCutchen flagged for HR is when an organization will implement the changes, as Dec. 1 is a Thursday.

One of the questions people are struggling with is if the new overtime threshold holds for that workweek, even if they are before Dec. 1, and “my experience with DOL is that the answer will be yes,” McCutchen said.

Employers will need to plan to enforce these changes for the workweek that “contains” Dec. 1, which could prove even “trickier” for the retail industry, as it’s the week after Thanksgiving and the middle of the busiest shopping weekend of the year, she noted.

In light of cases filed by both states and businesses in the U.S. District Court for the Eastern District of Texas seeking to delay or block the rule, McCutchen recommended employers also have to consider how difficult these changes may be to reverse.

Littler Mendelson P.C. in Washington is representing the Chamber of Commerce in the business lobbying group’s lawsuit to block the rule ( Plano Chamber of Commerce v. Perez, E.D. Tex., No. 4:16-cv-0732, summary judgment motion filed 10/14/16 ).

To contact the reporter on this story: Genevieve Douglas in Washington at gdouglas@bna.com

To contact the editor responsible for this story: Tony Harris at tharris@bna.com

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