IESConnect Article – November 2016

The December 1st increase in the minimum salary threshold for exempt employees is rapidly approaching. By now companies should have determined: 1) Which, if any, of their currently exempt employees fall below the adjusted salary threshold; and, 2) How they will address this – either through an increase in compensation or by re-classifying the affected employees as non-exempt.

When re-classifying employees, effective communication, training and follow-up are key to avoiding problems. What steps can you take now to help pave the way for a smooth transition for the company and employees?

Set up and Execute a Communication Plan

Recognize that re-classified employees may be unhappy or confused about the change. Individuals who have a real or perceived belief that exempt classification carries higher status within the organization may view conversion to non-exempt status as a demotion or reflection on their performance. An employee who is used to working fluctuating hours, taking long lunches, working through lunch, or working late into the evening to finish projects may have concerns about the loss of freedom and flexibility. Keep this in mind when communicating your decision to employees. Provide them with some background on the change to the law that affected their classification and assure them that this is simply a change in pay categorization rather than a reflection of their contribution, importance or performance.  Emphasize the positive – that they will now be entitled to overtime pay.

Provide clear communication about the change. This could be accomplished by meeting with the employee in person or through a letter, or both. Topics covered should include:

  • Any changes in pay rate/frequency/type
  • The effective date of the change
  • The reason for the change
  • How the change will impact the employee (for example, time-keeping, benefits, etc.)
  • Company policies and expectations of which they should be aware
  • Who the employee should contact if they have questions

Comply with State Notice Requirements. Determine whether your state requires some form of advance written notice about pay changes. Some, like California, require 7 days advance notice for any change. Others, like Delaware, require notice only when wages are reduced. Even if your state doesn’t require written notice, best practice dictates that you should give employees as much notice as possible before re-classifying their position.

Train Employees

This may be the first time (or at least the first time in a long while) your employee has had to track their time worked. Don’t assume they know what the rules are!

The following are some items you may need to explain or discuss:

The timekeeping system. How does it work?  When are timecards due? Who approves timecards? What should be included on the timecard? What should the employee do if they forget to record time?

Overtime Policies. Does your company require prior approval before working overtime? When is the employee entitled to overtime/double time? What workweek schedule does the company follow (e.g. Monday through Sunday)? What are the consequences for failure to comply with overtime policies or other company policies? Set clear expectations. If the employee typically catches up on emails or paperwork after hours, discuss whether the company will authorize overtime to continue this practice, or if the employee should plan to carve out time during the regular workday to accomplish these tasks. Be sure the employee understands that “comp time” is not permitted where non-exempt employees are concerned.

Working off the clock. Previously exempt employees may be used to checking email over the weekend, reading work-related material during breakfast, or making phone calls from their car on the way to work. Confirm that your employee understands that all time worked must be compensated, even if performed outside regular working hours. If the employee travels for work, address the need to track time spend travelling as well.

Company Property/Personal Devices. If your company provides workers with laptops or phones, or allows them to use personal devices for work, consider the possibility that they may be using these devices after hours. If you want to allow this practice to continue, you might want to set boundaries on the type or amount of work authorized. Any time spent working on the device for work purposes is considered time worked and should be tracked and paid. Keep in mind that tracking those hours could prove difficult both for employees and managers. If adherence to this policy will be an issue, you may want to consider prohibiting non-exempt employees from using personal devices for work, or limiting access to work devices during off hours.

Meal and Rest Periods. Some states, including California and the District of Columbia have strict rules regulating meal and rest periods. Clearly communicate company policies regarding the timing and duration of meal and rest periods and clarify that no work should be done during breaks.

Train Managers and Supervisors

The re-classified employee’s supervisor should be made aware that the individual is no longer exempt and, if necessary, trained on how it may impact the supervisor’s responsibilities. Training could include:

Laws governing non-exempt employees. Be sure the manager or supervisor understands the issues discussed in section 2 above and the importance of complying with wage and hour laws. For example, they should not ask the employee to work during his or her meal break. A supervisor who continues to treat the employee as though they were exempt could create costly non-compliance issues down the road.

Budget and Time Management Issues. Switching an employee to non-exempt status may impact company work production, scheduling and budget. Discuss these issues with the employee’s supervisor or manager so they can plan accordingly.

Follow up

Old habits are hard to break. Check in with your newly reclassified employees and their managers on a regular basis to verify that they haven’t reverted to previous patterns (e.g. not taking lunch breaks, checking emails after hours, etc.).

IES will provide all required notices to affected payrolled employees and is working with our staff, assigned employees and clients to provide communication and training where needed. Please contact your Account Manager or IES Human Resources with any questions or concerns.

The above article is for informational purposes only and is not legal advice.  You should consult with your attorney to see if any of the information provided here applies to your organization.

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