Let’s say you’re an employer. You own a small business and your employees are both hourly workers and salaried workers. Although there exist certain exemptions to the federal minimum wage requirement under the Federal Labor Standards Act (namely, employees working in professional, executive and administrative vocations), you know there is a good chance most of your employees are affected by the FLSA. Maybe you’ve heard that the FLSA is enacting its new minimum wage guidelines this December 1.
Let’s take a look at your workers and figure out how to best prepare to keep your company afloat. Here’s the game plan:
FIGURE OUT EMPLOYEE STATUS
Simply put, your employees are either exempt from overtime pay or they are not. An employee is exempt from overtime pay if the worker meets these three tests:
- Starting December 1, 2016, your employees must make more than $913 per week in order to pass the first test of exemption. This is known as the Salary Level Test.
- You must pay your employees the full salary on any given week, no matter the quality or quantity of work. This is called the Salary Basis Test.
- Your employees must comply and work according to the duties they have been assigned. This is called the Duties Test.
So long as each of your employees can pass these three tests, then you do not have to worry about compensating any of them for any overtime work (more than 40 hours) each week.
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UPDATE OR CREATE A SCHEDULE FOR EMPLOYEE TIMING (AMONG OTHER THINGS)
Hopefully, you already have some timing system put in place, whether it’s a paper record or online. If not, it is time to put together a system that efficiently records all of your employees’ time on a weekly basis. Technically, if you can exempt each of your employees through a higher salary, then a time schedule isn’t all that necessary. However, not every business can afford giving every affected employee a raise.
Remember, the new FLSA regulations, once in place, only have authority over your business if/when a non-exempt employee works overtime. And you are the employer, so you have control over your employees’ time at work. As long as you keep each employee at or under 40 hours per week through a well thought-out time system, the skies are clear.
Consider the following check list as a means of self-auditing your record keeping on wages and hours for your employees.
MAINTAIN ATTORNEY-CLIENT PRIVILEGE AND WORK PRODUCT
This information is most important in the scenario where an employee has sued for wage discrimination or for a violation of the FLSA. Attorney-Client privilege will, generally speaking, keep your communication with your attorney safe and secure. Maintaining a clear line with this and your attorney’s work product will allow open channels of communication between you and your attorney. That way, you are not only prepared proactively, but also reactively should anything happen.
REEVALUATE EMPLOYEE WAGE AND HOUR POLICIES AND PROCEDURES
It cannot be stated enough how important it is to fully understand the wage and hour policies and procedures you have established for every single employee in your business. This task will certainly range in difficulty, depending on size of your company, but the benefit of leaving no stone unturned here means there are no grounds for lawsuit down the road when the new regulations are here.
IDENTIFY POTENTIALLY PROBLEMATIC AREAS
Not every policy or procedure you review will pass muster. You must generate a plan for correcting potential pitfalls that is tailored to your company’s financial and managerial capabilities. On the legal side, this is where your attorneys will come into play. For everything else, this is where you will rely on your financial team, human resources, management, etc.
ENSURE PROPER EMPLOYEE CLASSIFICATION
Not every worker is your employee. In a separate blog, we discussed the differences between an employee and an independent contractor, but the gist is that only an employee is qualified to receive overtime pay under the FLSA if that employee qualifies under FLSA’s specific requirements.
Your job here will be to accurately identify and record each worker’s classification, job duties, scope of management, extension of authority, etc. For each employee you exempt from overtime pay (other than the hard and fast exemption of either paying at least $913 per week or capping weekly work at 40 hours), record your reasoning for it. You should pretend that each employee or the government challenges your reason(s) for exempting him or her.
COMMUNICATE NEW FLSA REGULATIONS TO EMPLOYEES AND TRAIN ACCORDINGLY
Finally, make it a genuine goal to effectively communicate these new regulations to your employees, independent contractors, interns and volunteers. Once you have communicated this new information to them, expect questions and pushback, so ensure the environment is a constructive one. Remember, your attorneys, financial team, human resources, management team, investors, etc. are there to help you best prepare your business for the new regulations and making sure that your employees know it just as well as you and the rest of management benefits the entire company.
WHAT’S NEXT?
Don’t be ignorant and don’t let your employees be ignorant. This is the law and it will help you and your business a whole lot to learn all you can about it. Once you have learned all you can, tell your employees about it. For any and all questions or concerns, the attorneys at The Vethan Law Firm, P.C. are here to help guide you through this so that you are not alone.
