A school administrative skilled makes an annual wage of $43,000. As a result of her compensation exceeds $35,568 per 12 months, she just isn’t eligible to earn time beyond regulation pay below the Honest Labor Requirements Act’s rules as amended in 2019.
That can change in lower than one month, nevertheless, because of a latest announcement by the U.S. Division of Labor. The company revealed its closing rule updating time beyond regulation pay eligibility, which will increase the FLSA’s minimal annual wage threshold through a pair of adjustments set to take impact over the following a number of months.
July 1 marks the primary enhance from the present minimal of $35,568 per 12 months to $43,888 per 12 months. After that, the threshold will subsequent enhance to $58,656 per 12 months on Jan. 1, 2025, roughly 65% greater than the present-day mark — and can routinely enhance each three years thereafter utilizing a method outlined by the DOL.
The HR division at our hypothetical administrative skilled’s faculty now has a collection of decisions to make. The worker could possibly be saved at her present pay stage and transformed from exempt to nonexempt standing, making her eligible to earn time beyond regulation pay. Alternatively, the school may enhance her pay in order to exceed the brand new threshold in order that she could stay exempt.
Assuming the latter alternative, nevertheless, ought to the school enhance the worker’s pay to fulfill the July threshold, or ought to it go additional? For instance, the school may choose to extend her pay past the January threshold in anticipation of the 2025 rule change. Or it may wait issues out to see if some — or all — of the rule will get struck down in court docket.
There’s extra to that call than employers would possibly understand, with concerns starting from the monetary capability of a company to boost pay to the diploma to which staff worth being thought-about a salaried skilled.
The American Council on Schooling, greater schooling’s prime foyer, has famous that the adjustments will “have important budgetary, programmatic, and human useful resource implications for schools and universities.” And at the very least one greater ed professional suggested extra schools to contemplate a merger, because the rule may enhance many already-distressed establishments’ monetary woes.
To assist readers higher contextualize such selections, HR Dive spoke with employment legislation attorneys who broke down the method step-by-step.
Step #1: Determine affected staff
Employers ought to first determine the inhabitants of staff who, based mostly on their wage stage, would now not be labeled as exempt, mentioned Brett Coburn, associate at Alston & Hen.
It’s a primary step, however employers must know what number of salaried staff have pay that might fall beneath the approaching will increase with a view to assess the scale of any potential pay will increase, Coburn mentioned.
As an apart, an worker’s pay is just one part for figuring out whether or not that individual meets the factors for exemption below the FLSA. There’s additionally the FLSA’s “duties check,” below which an worker’s job duties should additionally meet sure necessities for exemption.
“That’s nonetheless a essential half for me,” mentioned Deanna Kempinski, senior supervisor with Baker Tilly’s HR advisory apply, who added that employers could overlook the duties side of time beyond regulation eligibility. “It’s an amazing alternative to stage set with positions and job descriptions, and employers must take the time to guage every position.”
DOL’s most up-to-date time beyond regulation rule didn’t make adjustments to the FLSA’s duties check, however a change in time beyond regulation rules can nonetheless current a possibility to determine probably misclassified staff whose duties don’t meet these necessities.
“A few of these individuals will not be comfortably exempt,” Coburn mentioned. “It could be a grey space.”
Step #2: Run the numbers and analyze potential results
Subsequent, employers might want to decide what it might take to maintain an worker’s pay above the brand new threshold, Coburn mentioned, whether or not the distinction is within the tons of or hundreds of {dollars}.
One side that must be thought-about is how an affected worker’s pay compares to others in the identical position. If the worker’s pay is beneath that of their comparators, that will point out a deeper pay fairness concern. “You could have a possibility to mitigate or resolve some equal pay considerations by giving these staff a elevate,” Coburn mentioned.
In some instances, employers could discover that they already had plans to provide pay will increase to salaried staff who fall beneath the brand new threshold. However even deliberate wage will increase can create wage compression considerations, mentioned Jeff Brecher, co-chair of Jackson Lewis’ wage and hour apply group.
Particularly, if an employer decides to extend an worker’s pay to keep up time beyond regulation exemption, others who presently make greater than that worker may change into disgruntled, Brecher mentioned. And provided that future time beyond regulation exemption threshold will increase are deliberate for 2025 and past below the brand new rule, employers would possibly want to consider what a rise at this time may imply for its future pay insurance policies, he added.
One other strategy towards rising pay could also be to reconfigure the worker’s complete compensation, notably if their compensation bundle is heavy on bonuses or different incentives, based on Coburn. In that case, employers might be able to “entrance load a few of that into common wage,” he mentioned, although this sort of change may include productiveness considerations if the inducement construction is seen as contributing to worker productiveness.
The choice is to maintain the presently exempt worker at their present pay and convert them to nonexempt standing in time for the July 1 rule change, after which they might be eligible to earn time beyond regulation pay at time-and-one-half their common price of pay.
Apart from the necessity to practice transformed staff on timekeeping logistics, there are additionally morale implications. Whereas some salaried staff could welcome the change, others could really feel that they’re being demoted or could now not have the ability to make the most of any job flexibility that their beforehand exempt standing allowed them, Brecher mentioned.
“An exempt worker’s workflow could also be fluid, and the worker has flexibility relying on what their circumstances are to resolve how they need to full their work for that month,” he continued. “You lose somewhat little bit of that flexibility.”
Nonexempt standing conversion can also have an effect on different advantages and perks, Brecher mentioned. Exempt staff, for instance, could have entry to extra trip time than nonexempt staff as a result of construction of their jobs. Staff who’re reclassified could lose these advantages.
Salaried roles are usually not at all times appropriate with nonexempt standing, Coburn mentioned. At the moment exempt staff could carry out jobs that require, as an illustration, frequent checking of messages or emails throughout the late night hours or on weekends. Such work may be troublesome to trace for timekeeping functions, Coburn mentioned, and staff in presently exempt roles will not be within the mind set to precisely file it.
Step #3: Make preparations — even with lawsuits on the horizon
DOL’s time beyond regulation rule faces authorized motion that would delay it from taking impact. Enterprise teams filed a lawsuit in a Texas federal court docket on Might 22 asking the court docket to dam the rule from taking impact.
In an electronic mail to HR Dive, Coburn mentioned that information of that lawsuit didn’t change any of his steering to employers on the topic and added that employers “ought to undoubtedly be in wait-and-see mode” whereas persevering with to arrange for the July 1 threshold replace.
This partly as a result of a court docket could not concern a ruling earlier than the efficient date, however Coburn additionally mentioned that the January 2025 threshold was the principle focus of the Might 22 submitting, with “little or no dialogue” in regards to the July 1 replace.
“So, in brief, I believe employers must be making ready for the July enhance and contemplating the entire elements that we mentioned earlier this week, however I’d not roll out any adjustments to staff till we get a greater sense of when the Court docket would possibly concern a significant ruling within the new case,” Coburn wrote.
There’s a greater chance that the Texas federal court docket will enjoin the January 2025 enhance than the July enhance, Brecher mentioned. Giant employers could discover it notably troublesome to reverse any adjustments made prematurely of the deadline, and there will not be a lot time for employers to take action within the occasion of an injunction anyway, he added. A federal court docket’s 2016 injunction of the Obama administration’s closing time beyond regulation rule got here simply days earlier than the rule was set to take impact.
Step #4: Have your communications technique able to go
The best way through which an employer communicates adjustments associated to the time beyond regulation rule relies on the variety of staff affected in addition to the geographic distribution of these employees, based on Coburn.
If the entire variety of staff could be very small, HR groups may announce the adjustments to staff in one-to-one conferences with a supervisor current. However for big teams of affected staff, “I believe it’s most likely going to start out with a written communication to these teams that’s then adopted up with particular coaching,” Coburn mentioned.
He added that these communications must be despatched to each single affected worker and may embrace an evidence of why any adjustments are occurring in addition to the group’s expectations round correct timekeeping, if relevant.
“All that stuff must be conveyed in writing and likewise adopted up by a real-life coaching in order that persons are clear on what the expectations are after which comply with up with documentation that the coaching occurred,” Coburn mentioned. “You need to keep away from individuals saying, ‘Nobody ever advised me.’”
HR must be able to discipline any questions staff have, Brecher mentioned, and a extra strong possibility could also be to host a webinar or comparable presentation explaining the adjustments.
Employers additionally would possibly need to take into account making a question-and-answer doc for workers to reference because the change approaches, Kempinski mentioned. These paperwork may be crafted in order to cowl as many bases as attainable, however they could not have the ability to cowl each particular person circumstance.
