Lawyer urges area businesses to prepare for new overtime rules

Local business owners and managers are gearing up for Dec. 1. The updated Fair Labor Standards Act will take effect that day, making many salaried employees entitled to overtime pay.

On Tuesday afternoon, dozens of those business leaders assembled at Isle Casino Cape Girardeau to discuss the ramifications of the rule change. Invited by the Cape Girardeau Area Chamber of Commerce, Susan Bassford Wilson, a St. Louis lawyer specializing in management-side employee law, spoke about the updated law and strategies in dealing with it.

She also discussed legal attempts to stop the implementation of the regulation.

“Spoiler alert: It’s not going to happen. So accept that now and move forward,” Wilson said.

The final rule, passed in May, will increase the minimum-salary requirements to $913 per week, or $47,476 yearly. The salary basis test was amended to allow employers to use non-discretionary bonuses and incentives to satisfy 10 percent of the salary level.

These wages are eligible to be automatically updated every three years, which means the first salary increase will occur Jan. 1, 2020.

There are dozens of exemptions to the rule change, Wilson said, including seasonal employees and many educators. But “the stated goal for these changes is to make 4.2 million people qualify for overtime,” Wilson said. “Chances are, some of those people work for you.”

Wilson discussed how employers can prepare for implementation of this new rule. Specifically, they should consider whether salaried employees should be reclassified as nonexempt, hourly employees or have their salaries raised to at least $47,476.

If employees are moved to an hourly rate of pay and frequently work more than 40 hours per week, the employer will have to consider overtime payments when determining the worker’s hourly wage or limit them to no more than 40 hours a week.

Wilson also presented an option of a fluctuating workweek, which only provides workers with overtime pay of half the hourly wage, rather than the traditional time-and-a-half. With this arrangement, the fixed salary is compensation for all hours worked that week below 40, meaning if a worker worked fewer than 40 hours a week, he or she still would be paid full salary. If more than 40 hours were worked, overtime pay would be at 50 percent.

Wilson suggested making any agreement with an employee in writing.

If an employer is not cautious about his or her next move, it could prove detrimental to a small business, Wilson said. Increased overtime pay can become a huge burden on businesses. And the reclassification of employees to an hourly wage can leave them feeling devalued and resentful of new obligations to clock in.

Wilson encouraged the attending businesspeople to prepare talking points and answers to frequently asked questions when discussing with their employees how business will be run moving forward. She recommended passing the buck when discussing the rule change.

“Blame it on the government,” Wilson said. “You have very few chances to do so with full sincerity.”

Wilson also encouraged employers to make clear reclassification is not an indication of lowered importance.

“We all know there are many, many, many nonexempt employees who are critical to how your company operates,” Wilson said.

“Try to be as transparent as possible,” Wilson said, believing the changes will result in litigation, particularly from employees with hurt feelings or pride. “If you’re clear and transparent with them, that does a lot to deflate some of the anger and resentment.”

Workers who have spent years as salaried employees may have trouble remembering to clock in regularly. They will need to be reminded frequently at first.

“You may have to write up people who work without logging hours,” Wilson said. “It’s going to sting.”

But the regulations will require all working time to be recorded.

Also, Wilson said, those employees who remain exempt in an office of newly nonexempt workers may find themselves with more responsibilities because co-workers will be limited in the hours they work.

Wilson recommended employers talk to a lawyer about plans moving forward and to get those plans in place well before Dec. 1 to work out any issues that may arise.

“This is a great time to do an audit, to examine all of your employees in your workforce to decide if they’re being paid correctly and the exemptions are being correctly applied,” Wilson said.

bbrown@semissourian.com

(573) 388-3630