New OT Laws – Clearing Up Some Misinformation

Since last week’s announcement of the upcoming changes to the Fair Labor Standards Act (FLSA) due to go in effect 12/1/16, there have been wide ranging attempts by the media and others to capture and explain the impact of these changes in 20-60 second sound bites or condensed written pieces. The fact is, there are so many moving parts and impact points to be considered, that short and concise explanations are virtually impossible, and in many cases, irresponsible. As such, we have been receiving a wide range of questions from our clients since the announcement.

Here are some of the key areas of concern we have for our clients that have emerged this past week as they try to understand how to proceed in the face of these changes.

  • FACT – A substantial number of businesses in the U.S. presently do NOT fully comply with the CURRENT version of the FLSA. As such, any movement to comply with the changes effective 12/1/16 should also include addressing areas of your practices that do not meet current compliance standards.
  • The biggest drivers behind the failure for businesses to comply with the FLSA is failure to understand the very complicated and convoluted set of terms and regulations that make up this piece of legislation. The biggest and most typical trap is one where the business owner / management views the determination as to who gets paid OT as discretionary, and in part as impacted by perceived fairness – both are which are patently false.
  • BOTTOM LINE – Before even considering the new regulations, if your business has employees who exceed 40 hours of work in a given work week AND have fewer than two (2) direct reports (or none at all because they are not in a managerial role), then you should assume that they should be classified as non-exempt, making them eligible for OT pay, until you can find solid evidence within the FLSA to support a different classification.
  • Fixing a situation where someone has been working OT, has not been paid for it, and now is deemed to have been misclassified, can be a very complicated and expensive process. It is strongly advised that you address such fixes with professional advice and input as to your next steps.
  • We expect to see a significant amount of reactive activity to the FLSA in the coming year, in many cases driven by employees coming forward to inquire about their own possible misclassification, putting employers on their heels and having to react and defend, all of which may have a caustic effect on both morale and culture, and attraction and retention. A step to proactively manage the anticipated noise will in our view go a long way towards maintaining some control and defusing potentially damaging consequences otherwise.
  • Businesses who comply with the new rules, but fail to comply with other parts of the FLSA, risk greater loss of control over their strategies to fix past errors, especially in the event the Department of Labor (DOL) visits to conduct a wage and hour audit.

Three solid steps to take at this juncture:

  1. If you have not already done so take a look at the Department of Labor FAQ pages on the FLSA, which can be found here: https://www.dol.gov/WHD/overtime/final2016/faq.htm#G1.
  1. Stay informed. Do so by keeping an eye out for more information from credible sources on how to comply. This includes our upcoming webinar on June 1st. More info at http://www.operationsinc.com/events/16-06-01/navigating-recent-changes-fair-labor-standards-act-flsa.
  1. Speak with a professional. In our view, initial assessments can and should be done by the HR community and HR professionals, complimented as needed by employment law counsel.