In a Law360 article published on September 25, 2019, Alicia Koepke provides insight on the U.S. Department of Labor’s recently released overtime rule, which updated the Fair Labor Standard Act’s (FLSA) overtime and minimum wage requirements by raising the salary threshold to $35,568 per year for employees to qualify as exempt. Employers have until January 1, 2020 to comply.
To prepare, employers will likely need to review the status of all workers who earn below the new salary threshold but were formerly exempt. However, according to Koepke, a common mistake employers make when conducting these reviews is taking too long to call their lawyers, which could leave the process open to legal scrutiny.
Businesses who do not conduct reviews or make internal updates should contact outside counsel as early as possible to avoid legal obstacles down the road. “That way, the communications that they have will be privileged, and they can have open and frank discussions about how to classify workers and what the implications will be of any reclassification,” Koepke explains. “Oftentimes, employers wait too long before contacting their attorneys, and then they’ve got a whole host of documents and emails that are not privileged that could be produced in a subsequent DOL audit or litigation.”
If employers choose to reclassify workers as hourly, they will also need to ensure those individuals know what is expected of them as hourly employees and the procedures they need to abide by. “To the extent that they do reclassify any exempt employees as nonexempt, it’s imperative that they then train those employees on how to properly track and record their time,” Koepke notes. Additionally, she says that as part of their review process, employers should determine if they need to amend their policies or contracts with workers to account for any essential changes to benefits for reclassified employees.
Three months to complete the review process will go quickly, and Koepke says that companies should anticipate the FLSA audit to take at least a month in addition to the time it will take to implement any changes. “The safest way to proceed would be to ensure that all changes are fully implemented at least prior to the pay period that encompasses Jan. 1.”
Subscribers to Law360 may read the full article here. Click here to read Alicia Koepke’s article on the newly announced rule.
