On Monday, July 1, the Fair Labor Standards Act (FLSA) went into effect. It is also known as the final rule Defining and Delimiting the Exemptions for Executive Administrative, Professional, Outside Sales and Computer Employees. (DOL)
The Act implements the exemption from minimum wage and overtime pay requirements for executive, administrative, and professional (EAP) employees. Adjustments will also take place on January 1, 2025, when changes in the methodologies used to calculate these levels become applicable.
Because of the change, many employers are thinking about reclassifying certain salaried exempt employees. A recent blog from Lexology.com cautioned employers about some of the ripple effects of the Department of Labor’s final overtime exemption rule.
Potential Impacts
- Impact of reclassification and budget – deciding how and how much to pay the employee. No matter how the non-exempt employee is paid, their hours must be accurately recorded. An employer must pay at least the minimum wage + any overtime worked. The employer must accurately budget for overtime costs and forecast the potential for overtime from that employee.
- Reclassification and work habits – The flexibility of an exempt employee to manage their schedule and complete work accordingly is not consistent with what many think of as the traditional role of a non-exempt employee. An employee changing from exempt to non-exempt status may need to readjust how they think about getting work done and this may require manager input to ensure work habits continue to align with the new status.
- Reclassification and morale – For some, there is a certain prestige to being an exempt employee and some may find it demoralizing to be reclassified as a non-exempt employee. It is important employers account for this, especially when you consider 52% of employees say they are watching for or actively seeking a new job, according to the Gallup – State of the Global Workplace report.
- Reclassification and Fair Workweek/Predictive Scheduling requirements – Depending on your jurisdiction, your state may have predictive scheduling laws, and depending on the location and the industry, reclassified employees may be covered under these requirements. This includes the provision of a good faith estimate of hours worked. Uninformed employees risk incurring penalties by violating these requirements.
Lexology
In short, it will benefit employers to make a nuanced decision before deciding whether or not to reclassify an employee. It is important leadership takes a close look at the priorities of the business and where the time and talent of employees will be best focused.
This important employment information brought to you by Staffing Kansas City, a full-service employment agency serving the greater Kansas City Metro area.
