Here’s how local governments can get up to speed on the new overtime regulations (with related video)
Revisions to the federal Fair Labor Standards Act (FLSA), announced in mid-May, will expand the pool of workers eligible for overtime pay—and that pool includes both public- and private-sector workers. The final rule from the Department of Labor (DOL) that updates the overtime regulations will automatically extend overtime pay protections to over 4 million workers during the first year of implementation.
The DOL final rule grows the pool of eligible workers by more than doubling the salary threshold that determines coverage. Under the new regs, any salaried employee earning less than $47,476 annually would be entitled to time-and-a-half for work that exceeds 40 hours per week. Currently, the salary cutoff for overtime pay is $23,660. The final rule will take effect Dec. 1.
GPN reached out to attorney Michael J. Napoleone to find out how cities and counties can prepare for the recently revised overtime regulations. Napoleone, who is based in West Palm Beach, Fla., is with the firm of Richman Greer. He offers his views below.
GPN: What steps can local governments take to comply with the new U.S. Dept. of Labor overtime rules?
Michael J. Napoleone: The federal government has been telegraphing this move for several years, so most local governments have likely already taken action in anticipation of the new thresholds. As a practical matter, the existing distinctions between hourly and salaried employees have pushed the pay scale of exempt employees to very nearly the level of the newly imposed minimums. For those that still need to take action, there are several options available: (1) reclassify current exempt level employees to non-exempt if they do not meet the new standard; (2) raise the pay of current exempt level employees to meet the new standard; (3) reduce workloads for non-exempt employees who regularly work more than 40 hours per week; or (4) adjust salary budgets to allow for increases in salaries and additional overtime pay.
GPN: Should governments consider offering comp time to employees? One DOL resource outlines the permitted use of compensatory time off in state and local governments.
MN: For some local governments, comp time is hard to track and enforce, so many do not offer it. For those where comp time is an option, pursuant to an agreement with their employees (or their representatives in a union environment) state or local governments may provide comp time instead of a cash payment for overtime hours.
GPN: Should government raise eligible workers’ pay so those workers stay exempt?
MN: This is generally an option that needs to be addressed on an individual employee-by-employee basis. In many cases, it will be cheaper to pay overtime than to make significant salary adjustments. Paying overtime eliminates “wage creep,” forces supervisors to better evaluate additional work hours, and limits non-salary payroll expenses.
GPN: Will cities/counties need to track employees’ hours more closely and rely on worker time tracking systems?
MN: Absolutely. Increased accuracy, monitoring and evaluation of employees’ hours increased with the implementation of the Affordable Care Act, whereby the average hours worked may have triggered the need to provide health insurance.
GPN: Do you have any advice for governments on how they need to respond?
MN: Start planning for implementation now by:
a. Determine exempt positions where employees currently earn less than $47,476
b. Identify pay strategies and modeling scenarios for increasing the salary of exempt-level employees to the new salary to maintain their positions as exempt; reclassify certain exempt-level positions to non-exempt; calculate additional overtime generated by newly reclassified non-exempt employees; and review staffing budgets to accommodate changes.
c. Analyze work requirement and duties for employees who are reclassified as non-exempt, establish overtime restrictions and hourly reporting requirements.
d. Analyze your benefits and paid-time-off structures to determine whether changes need to be made as the employee transitions from exempt to non-exempt status.
e. Plan your communications strategy so that impacted employees will understand the changed and expectations going forward.
In the video, the U.S. Department of Labor explains why it changed the rules governing when employees can be exempt from overtime pay. The new rules take affect December 1, 2016.