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LAW

Jill Chasson

Tracy A. Miller

Lindsay M. Schafer

IMPACT ON BUSINESS In addition to allowing employers to use non-discretionary bonuses and incentive payments to satisfy up to 10 percent of the salary threshold for exempt employees, the DOL will also allow employers to make catch-up payments to employees who do not earn enough in non-discretionary bonuses or incentive payments in a given 52-week period to retain exempt status, provided that the catch-up payment is made within one pay period of the end of the year. “Employers should note that the changes in these regulations, while disruptive, provide an excellent opportunity to investigate and resolve any lingering questions related to employee exemption status without raising a red flag,” Schafer says. Accordingly, Schafer says employers should use this time to evaluate positions that are close to the salary threshold, and any other positions that may be in question, prior to January 1, 2020. Before next year, she says employers should either increase pay to the threshold requirement or reclassify employees, taking care to develop a strong communications plan explaining the reasons for any changes that will be made.

Gregory W. Seibt

Dylan Wright

“It’s important to know whether the FLSA’s overtime rules apply to you,” Wright says. “Know whether you have employees who fall under the new limits for overtime exemption. Simply paying salaries on an annual basis does not avoid otherwise valid overtime obligations. You need to take a fine-grained look at who might become eligible on January 1, 2020.” Wright says if you already have non-exempt employees, be sure to work with your human resources personnel to bring your newly-eligible employees up to speed on your company’s overtime policies and procedures. If you don’t have any overtime policies in place, now might be the time to consult with a human resources specialist or employment attorney to make sure you’re compliant with applicable FLSA rules. “Businesses should look at the rule change as a good opportunity to review their exempt classifications,” Miller says. “If you are treating a worker making less than $35,568 annually as exempt, there is a decent chance this worker is misclassified based on the duties test. Even if your business is not affected by the rule change — and most will not be — you may find that you have misclassified workers. Now is a good time to correct those mistakes.”

PREPARING FOR CHANGE

This is how business owners and executives can best prepare for implementation of the new overtime rule, according to Jill Chasson, attorney at Coppersmith Brockelman: • Employers should review compensation for all exempt employees to determine who is currently being paid less than the new minimum salary. This is also a good time to evaluate whether exempt employees are properly classified, and to identify any pay disparities among similar employees that should be addressed. • Some employers may choose to comply by increasing certain employees’ pay to above the salary threshold. It is important to note that doing so may cause a ripple effect of pay raises across the company, depending on whether the company has an integrated compensation system. • If the employer chooses to reclassify certain employees as non-exempt, they should consider transitioning these employees to hourly pay in order to better track and calculate overtime. Employers also will want to take steps to ensure that newly nonexempt employees track their work hours properly and follow the company’s timekeeping policies and practices.

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AB | November - December 2019

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