Proposed regulations raising the salary employees must earn to be exempt from overtime were published in last Friday’s Federal Register. You have until Nov. 7 to comment. Comments may be submitted electronically through the Federal eRulemaking Portal.
Publication in the Federal Register is the start of a long process. Whenever the comment period closes—extensions of comment periods are common—the Department of Labor must read those comments before it issues final regulations.
You need to use this time wisely to determine the impact final regulations may have on your payroll by auditing your employees and your pay policies.
Here’s some help getting started.
FLSA status audits are good; do-it-yourself status audits aren’t
You should conduct periodic FLSA audits anyway. While routine self-audits will review your internal systems, from timesheets to general ledger to net pay, status audits are narrower. To get started:
- Identify employees; pay attention to assistant and middle managers.
- Determine a back-of-the-envelope exposure to overtime liability by identifying how many hours a week these employees work.
No doubt, employees have heard of these regs, and your assistant and middle managers may be even more curious, since they know they’re on the fence. They may not even wait for final regs to question their status.
To minimize the likelihood of having to disclose the findings of your self-audit to an employee’s lawyer, retain outside counsel to conduct it. This way, the company can claim the attorney-client privilege or the work-product privilege.
These two privileges aren’t as expansive as is sometimes portrayed on television, however, so you probably won’t be able to work with your attorneys as they conduct the audit. Provide them with the names and positions of employees who are likely headed for reclassification as nonexempt, and walk away.
Too often, job duties change in reality, but not on paper. Suggestion: Have the lawyers develop a job description survey they can administer to employees. You can truthfully tell employees the company is interested in their input in updating job descriptions.
The survey should ask open-ended questions and encourage employees to be as precise in their answers as possible. Sample questions could include:
- What are your essential and nonessential job duties? What portion of your day do you spend in each?
- What does your Monday morning look like?
- How have your job’s duties or goals changed over the course of your employment?
- How would you describe your job to a new employee?
- What was the most challenging part of your job during the last year? Describe how you confronted this challenge, who worked with you to find the solution, and whether the resolution impacted your current job duties.
- Describe how your leadership—formal or informal—affects others.
While the emphasis right now is on salary, don’t forget the duties tests for exempt status. Employees who are classified as exempt must meet the criteria for their exemption—administrative, executive, computer, or outside sales.