Human Resources News & Insights

3 awkward conversations DOL’s new overtime rule will spark

Are you ready for the three most difficult conversations you’ve had in a while? 

The DOL’s changes to the FLSA white collar overtime exemption regulations aren’t just going to be a financial headache for employers; they’re also going to be a managerial dilemma.

If the final rule resembles anything close to the DOL’s proposal — which would crank up the minimum salary threshold for all exempt employees to $50K (or at least $47K) — large chunks of some companies’ workforces are about to go from exempt to non-exempt.

Financial implications aside, that creates a huge management problem: The change in classification could feel like a demotion to employees.

They’ll blame the DOL, right?

If you think employees will curse the Obama Administration for what could essentially be an overnight change in their work arrangements/classifications, you’re in for disappointment.

Odds are the average worker’s going to blame you, their employer. After all, not everyone keeps up to date with what the feds are doing. So, on its face, the shift from exempt to non-exempt status may come off looking like something your company did for its own benefit — unless you’re willing to set the record straight right now.

With the finalized rules slated to hit any day now, it’s time to prep for these awkward employee conversations the rule changes will spur:

1. Comp conundrum

Companies are facing a crisis of compensation. And this is the No. 1 question you should be pondering now:

  • Do we expect newly non-exempt employees to be as productive working strict, 40-hour workweeks? (Note: This is assuming you’re not going to leave the door open for them to collect overtime on top of their regular pay.)

If your answer is no, that begs three more questions:

  • Will you decrease their pay and allow them to work OT to catch up?
  • Are you willing to be lenient and allow them to work some overtime? or
  • Will you lessen their workloads?

No matter the determination you arrive at, it’ll require a carefully-crafted conversation — and that goes double if you’re taking duties off of someone’s plate.

Reason: Your better employees will look at the move as you taking responsibility away from them — again, a demotion.

2. ‘Status drop’ disappointment

Adding to the perceived notion that they’re being demoted is employees’ loss of a salary.

Many view earning a salary as a rite of passage — after years of punching a time clock, they feel they’ve finally reached professional status.

But unless you’re willing to pump up these folks’ salaries above the new FLSA threshold, that status is about to change.

In other words, they’ll feel like being reclassified as non-exempt — and having to punch a time clock — is a loss of status.

This perception will be magnified 10-fold if they’re left out of after-hours business discussions in which they were previously included to prevent them from making OT.

This perception problem puts the onus on HR and employees’ managers to evaluate individual situations and find a way to assure employees they’re not being “demoted” or “losing status.”

3. Flex time talk

In a recent SHRM survey, 67% of HR pros said if the new rules lead to increases in OT eligibility and OT pay, it’s likely that employees will have decreased flexibility and autonomy.

After all, a lot of employees will have to start punching a time clock who haven’t done it before (or at least haven’t for a long time). That means arriving late and leaving early will result in less pay when it didn’t before — and telecommuters will feel as though Big Brother’s starting to watch them.

There’s no easy way to explain why this is how it has to be for many workers — but you do have one feather in your cap, should you chose to use it …

… a clearly defined structure

One way to sell employees on the idea of becoming non-exempt is to position the move not as as a loss of flexibility, but as a definition of structure.

Their hours will now be finite — and if they were working over 40 hours before, they can now spend that time with family and friends (if your plan is to now have them work overtime).

Plus, since it appears the DOL’s going to classify any time spent answering work email and phone calls after hours compensable time, chances are employees won’t have to do that either. Thus, their work/life balance may actually improve as less work will creep into their personal time.

Info: For more on how to deal with difficult conversations, here is HR Morning’s list of conversation do’s and don’ts.

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  1. If the company chooses to make an exempt employment non-exempt, for whatever reason, that is a demotion by the company not the DOL (you always have the option to pay the higher salaries)

    The removal of flex time and remote work will only be effect those of that have that option and it’s my experience that if you have flex time/remote work you are already making close to the new minimum if not more.

    As for “thinking about if the worker can do the same level of productivity with ONLY 40 hours” and adjusting the salary because the “extra time” was factored into them base IS the reason for the rules change…

  2. Ummm, why, if a trusted employee is switched from exempt to non-exempt, would they need to punch a time clock? If they say they worked 2 hours of overtime this week, then pay them that. If they say they worked 20, then pay them that. Or, simply don’t allow more than 40 and hire someone else to help out.

    Also: “Will you decrease their pay and allow them to work OT to catch up?”

    So, before I made $800 a week ($20/hr if paid 40 hours) but worked 60 hours for you ($13.33/hr * 60 = $800) and now you want to pay me $11.50/hr (so 40 at $11.50 and 20 at OT of $17.25 = $805) with you ALWAYS having the option of just trimming me down to 40 = $460/mo?

    I don’t think so.

  3. Itsnottheendoftheworld says:

    Hmm, or perhaps instead of, say, having 3 employees work 50-60 hours each week, you hire a 4th employee and keep everyone at the same pay. Keep telling yourself that people are going to be more concerned about their “status” instead of the boon of free time to spend with families and outside work. Companies have had runaway profits for years as a result of increased productivity. About time it’s shared with the workers.

  4. Chris Collins says:

    There is such a thing as Salary non-exempt. Which is how most companies if they value their employees at all will treat them. Nothing changes except they get paid more if they work more then 40 hours. Under 40 hours everything stays they same, and you just have them self report the hours on a simple form.

  5. Pat Travers says:

    This is one of those cases where to protect some workers (who definitely need the protection) all workers who are salaried will be affected. Some negatively. I worked part-time in a convenience store and the managers made $500 per week. They were on-call 24/7. The DOL has known about this practice for YEARS, yet they never stepped in and investigated these situations to correct in pay inequity. So rather than deal with the problem situations, DOL decided to up the exempt standard with the thought being that employers would GLADLY give these people raises. The ones that will be hurt are small companies that, like mine, don’t have employees that work much over 40 hours and those who do are already compensated well over the new threshold. Those who just work 40 hours will be reclassified and we’ve been through this before and mayhem ensues.

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