Finance pros are eager to see what the DOL’s new overtime rules will look like this summer — not because they’re fans, but because they want to see how much their FLSA compliance efforts will have to change in a very short period of time (within 60 days, most likely).
Employers don’t know exactly what the rules will look like, but they do know the requirements — like a higher salary threshold for exempt employees — will make more employees OT-eligible.
An increase (and likely a large one to boot) in the number of non-exempt employees is scary enough for employers. But it likely won’t end there.
Add to that a potential increase in the complexity of the “white collar duties” tests, widespread minimum wage hikes and the attention federal regulators are paying to independent contractor classifications — and you’ve what employment law attorney Richard Alfred described to Fortune as “a perfect storm for new lawsuits.”
Alfred, who heads up the wage-and-hour practice at the law firm Seyfarth Shaw LLP, told Fortune he expects the number of overtime lawsuits alone to increase to about 9,000 this year. That would roughly be a 10% increase in the number of lawsuits filed in 2015 — a number which stood at 8,160, according to Alfred.
Two big reasons for the potential increase in lawsuits include:
- the increase in the number OT-eligible employees, and
- the glut of compliance problems likely to result from simply changing the rules at all.
Ways to stay safe
What can employers do now to safeguard themselves from costly lawsuits? There are a number of steps they can take (which HR Morning outlined in detail here):
- Audit employees’ work hours. If more of your staff is about to become OT-eligible, you don’t want to be blindsided with OT obligations because you assumed it takes 40 hours per week for a worker to complete his or her job when it actually takes the person 50 hours.
- Expand time-tracking. If your non-exempt employee population is about to swell, that will require an expansion of the systems you use to track workers’ hours to ensure proper overtime pay.
- Revisit remote work arrangements/policies. Ask yourself what the rule changes could mean for remote work — checking work email, taking phone calls after hours, etc. You can dissuade or even prohibit non-exempt employees from doing these things after hours. But the bottom line remains: some are still going to do it, and when they do, you need a way to track that work time and compensate them for it.
- Prepare for changes to the duties tests. It appears the DOL may eliminate the “concurrent duties” rule and require employees to spend more than 50% of their time exclusively on exempt duties for them to maintain an exempt classification. Assume those changes will be adopted and you could avoid unpleasant surprises down the road.
Workers could take advantage
It’s likely following the rules won’t just be an issue for employers — it’ll be an issue for employees as well.
It’ll come as no surprise if the DOL’s new OT regs result in a lot of formerly exempt employees having to punch a timecard for the first time. But what could surprise a lot of employers are the thorny people problems this may create.
Example: Resentment for having to punch a timecard for the first time could lead some employees to take liberties with their timekeeping.
Some ways this can happen include:
- engaging in personal activities outside normal breaks while on the clock
- coming in late but recording it as “on time”
- recording time falsely for another employee, or
- taking an extended meal break but recording less time.
Preventing these practices will require strict policies and policing by managers (HR Morning provided more detailed prevention steps here).