What do the new FLSA regulation changes mean for your organization?
Nothing evokes an emotional response with as little tangible day-to-day change quite like re-classifying an employee from exempt to non-exempt. A balancing act of risk mitigation, careful communication and change management goes into any dealing with the FLSA. These steps are amplified when you’re dealing with the engagement and morale impacts of employees feeling they have been deemed less professionally valuable by their organization.
The FLSA regulation changes made by the Department of Labor, effective December 1st, 2016, have meant different things for different employers. The retail and service industries have been faced with a daunting decision of increased costs, either through payment of overtime or unforeseen salary increases to maintain exempt status for their employees. On the white collar corporate side of employers, the impact might be flipped. For the most part, a majority of white collar salaried employees are already paid above the new minimum salary threshold set by the updated FLSA standards. So, provided they meet the salary requirement, they can remain exempt with no pay adjustment, right? No major impacts for white collar corporations, right? Maybe, maybe not – depends on your prudency for risk avoidance.
With changing regulations comes increased scrutiny on compliance with those regulations. While these recent FLSA changes didn’t change the standards and measure of the ‘tests’ for the exemption categories, many organizations feel impending scrutiny aimed at the accuracy of their existing classifications – i.e., are our exempt jobs truly exempt? Should some of our salaried employees actually be hourly? After all, a large motivation behind these recent FLSA changes was the reversal of the increasing percentage of the workforce being exempt from overtime, which has been seen continually moving upward for several decades. The Department of Labor, particularly under the Obama administration, wants to see as much of the workforce eligible for overtime as possible. On the employer side, there is a vested interest to classify employees as exempt to transfer focus from hours worked to quality of work. Employees, too, view exempt salaried status as a threshold of professionalism in their career. These varying motivations come to a head when organizations must take a hard look at their current exempt positions and decide if, in fact, they belong in the non-exempt classification under the FLSA.
A successful FLSA exemption review follows a multi-staged approach:
1) Complete a thorough review of job responsibilities with employment law counsel. Don’t simply rely on vague job descriptions for such an important decision. Involve managers in the discussions, as it is the details of the role, the levels of independence, autonomy, authority and discretion, which can determine a job’s classification.
2) Focus on education and change management with leaders and management of roles that are undergoing a classification change. Ensure leaders are involved in the process from the start and understand the what, why, when & how of what the organization is performing. Empower managers with education on what can be a challenging topic so they can confidently communicate the change and answer questions, as opposed to relying on an ‘HR is making us do this’ response. Managers should be part of the member-material formulation process, ensuring their buy-in to the change.
3) Communicate, communicate, and communicate to the impacted members. Provide in-person notifications, not emails. Provide guides, FAQ’s, and be open to additional questions that those items may not cover. It is imperative that members understand clearly what this change does and does not mean for them. Be aware that you will encounter the full spectrum of ultra-practical (‘Hey, overtime now? Great!) to the ultra-emotional (‘Oh, so I’m nothing more than an hourly rate to you!?) in response to the change, and communication efforts need to accommodate that spectrum.
The mention of FLSA tends to induce eye rolls and groans for HR departments and employers, and it’s easy to forget that the law is based on fair treatment for employees, for which few would argue against. HR members are employees too, after all. It remains to be seen if the changes are impacted by the new U.S. political leadership, but one thing is certain – changes of this nature offer HR an opportunity to demonstrate their value in facilitating change in the organization. That is a key value that HR needs to deliver on, and regardless of how painful the change topic may be, the right planning & execution by HR can make or break the process and either help or hurt HR’s reputation.
UPDATE: A federal judge has recently blocked the implementation of the new FLSA regulation that was set to begin as of this Thursday, December 1st. It is unknown when and if the block will be removed, and if any changes will be made to the policy. Read more about it here.
Greg Bauer, PHR is a Senior HR Generalist at DLL in Wayne, PA. Connect with Greg on LinkedIn!