With the advent of the USDOL’s newly proposed classification rules, implementing the new salary threshold to $913 per week, employer groups and counsel have been straining to determine the best way to react to this development.  This can be, according to some commentators, a daunting task.  What is important is that there are several months before implementation (December 1, 2016), which gives employers time (but not a lot of it) to determine how to proceed.

Dollar signs
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Some protocols and procedures are, however, self-evident and incumbent upon all employers to deal with.  First, employers must decide what to do with employees whose salaries are near the new threshold.  This means making a determination if these folks are truly exempt and then ascertaining how many hours per week they usually work.  If the employees are not working more than forty hours as a general rule, then, maybe, nothing has to be done.  Misclassification by itself is not a problem—the problems arise when misclassified workers typically work more than forty hours every week.

If the decision is made to re-classify, then, by ascertaining the number of hours usually worked, the employer can back into the “right” hourly rate to pay, so that when coupled with overtime hours and payment at time and one-half, the outlay for the employee(s) does not escalate or go up at all.  This approach satisfies the employer’s obligations to comply with wage hour law and its business needs.

Employers must also understand that if they reclassify individuals, they must keep accurate records of hours worked.  There are many methods, such as “time clocks” or more sophisticated electronic timekeeping protocols.  These timekeeping methods will take managerial oversight to implement and, more importantly, to maintain, especially because, currently, managers are not accustomed to paying close attention to exempt employee work hours and comings-and-goings.

The Takeaway:  Do An Internal Compliance Audit

I firmly believe that virtually all employers are not intentionally violating the FLSA; they want to comply and want to figure out how to do that.  The FLSA is a much-nuanced law and this new salary level raises a host of issues, separate from merely raising currently exempt employee salaries.

Even if employers raise employee salary levels to the new $913, that by itself does not guarantee that the employee will still remain exempt as there is the equally important duties test.  Therefore, my strong, categorical recommendation is that employers conduct a self-audit of those employees they consider exempt to ensure compliance with the FLSA.

Such a task, particularly if conducted by counsel who are conversant in this area, is not an expensive proposition and can yield savings of (hundreds of?) thousands of dollars if exemption determinations are made in a reasoned, compliance-oriented fashion and are therefore able to withstand attack (i.e. a lawsuit).