Implementing the New Overtime Final Rule – Tips to Preserve Company Culture

On November 22, 2016, a federal judge in Texas issued a nationwide injunction blocking the Department of Labor’s rule that would require overtime pay for millions of workers. The regulation was scheduled to take effect on December 1, 2016.

A final Labor Department rule on overtime could signal big changes for companies of many sizes and scopes. Announced on May 18 by President Obama and Secretary of Labor Thomas Perez, the rule makes it easier for employees to qualify for overtime pay. In total, it is expected to provide overtime protection to 4.2 million salaried workers.

The Final Rule, as termed by the Department of Labor (DOL), defines and delimits the exemptions for executive, administrative, professional, outside sales and computer employees under the Fair Labor Standards Act. Until now, workers who earned more than $23,660 per year, or $440 per week, were exempt from overtime if they performed managerial or professional duties. Under the final rule, that salary threshold has been increased to $47,476 per year, or $913 per week.

Some companies may not be significantly affected. Yet others will find that it fundamentally impacts the ways in which they do business—and that includes potentially transformational effects on their culture.

What Should Companies Do?

According to the DOL, employers have a range of options for responding to the updated standard salary level.

Businesses not already doing so will need to start tracking hours for exempt salaried employees who are at or below the $47,476 threshold.

For each affected employee newly entitled to overtime pay, employers may:

• increase the salary of an employee who meets the duties test to at least the new salary level to retain his or her exempt status;
• pay an overtime premium of one and a half times the employee’s regular rate of pay for any overtime hours worked;
• reduce or eliminate overtime hours;
• reduce the amount of pay allocated to base salary (provided that the employee still earns at least the applicable hourly minimum wage) and add pay to account for overtime for hours worked over 40 in the workweek, to hold total weekly pay constant; or
• use some combination of these responses.

Prepare for Cultural Change

First, communicate. Sound, effective and transparent communication throughout your organization enables employees to understand how and why your company policy is changing as a result of the Labor Department’s action.

Next, watch and listen. While you may communicate information about the Final Rule as effectively as you possibly can, your task doesn’t end there. You need to monitor reactions throughout the organization and have the necessary infrastructure in place to field questions, encourage dialogue, and devise and deliver ongoing communication as necessary. That may occur through staff meetings, company retreats or other initiatives. Whatever the tactic, keep your finger on the pulse of communication within your organization—you’ll be better prepared to engage truthfully and sincerely.

Last, it’s up to management to set the tone for the organization’s culture. That starts and ends with their behavior, language and actions. Research proves that positivity is contagious. If you want others to embrace change, you need to embrace it with your words and actions.

Note: You may not have all the answers. If that’s indeed the case, then be transparent and admit it to your employees. They’re generally less likely to worry about issues if they at least know about them, and have confidence that management/ownership is forthcoming.

We will continue to monitor the latest news and issues surrounding the Final Rule, and we will keep you apprised of the latest developments.