Four Approaches to Managing the Impact of the DOL Overtime Rule Changes

To comply with the Department of Labor’s overtime legislation, all employers must decide whether their salaried employees will be exempt or non-exempt from overtime by December 1^st of this year.  The DOL predicts the new regulation will cost private employers in the neighborhood of $1.8 billion in 2017.

There are four basic scenarios that employees will encounter in the coming months:

1. They will be paid the exempt base salary of at least $47,476 per year
2. They will be reclassified as an hourly employee and eligible for overtime compensation
3. They will be kept at their current salary level and payed for any overtime hours
4. Their typical overtime hours will be factored into a 40-hour work week to convert their current salary base into an hourly wage

Although these four scenarios differ greatly from one another, employers can navigate each one of them effectively if they follow the corresponding four phase engagement process.

Phase I – Employee Reclassification Checklist

1. Initiate a formal review of job descriptions to confirm exempt or non-exempt status
2. Review employee benefits, eligibility, and plan design
3. Retool employee handbook and policies (meal breaks, overtime, working from home, etc.)
4. Analyze workload  and overtime alert procedures to minimize overtime exposure
5. Firm-up hours, tracking expectations, and engagement goals for exempt supervisors
6. Restructure commission and non-discretionary bonus impact (only 10% qualify as salary)

Phase II – Employee Perception

1. Foresee various reactions from employees
2. Acknowledge that some employees will see this as a demotion, while others will see it as beneficial
3. Combat the negative stigma that comes with being salaried and then having to track hours
4. Anticipate negative employee feelings and determine how the employees, who have converted to hourly, fit within the new structure

Phase III – Employer Messaging

1. Propose an introductory meeting prior to December 1^st to notify employees of impending changes
2. Address the group as a whole concerning fairness and equality issues
3. Encourage follow-up communications and be prepared for informal employee inquiries
4. Issue the new policy with an updated employee handbook
5. Sample pay-stub layout for each affected employee
6. Reinforce employee value to company operations, explain rule is mandated by federal law
7. Update Job Description and Employee Acknowledgment signature

Phase IV – Employer Opportunity

1. Increase employee transparency with hours tracking
2. Improve performance reviews, productivity, and job cost
3. Minimize the risk of missing important issues that typically come to light for hourly employees

Although there is a lot of negative buzz concerning The DOL’s new overtime legislation, there is potential upside for employers. The DOL has prompted the need for a formal reset of how time is tracked and how jobs get done. If employers are able to comply with this legislation and minimize employee unrest simultaneously, they will be able to increase productivity and augment their bottom-line.

If you have any questions about this new overtime legislation or would like to talk with an expert to learn how Mosaic can help you navigate it successfully, call (303) 645-4270 or visit www.mosaices.com.

       

Department of Labor Overtime Changes and Automated Time and Labor Management

The Department of Labor recently increased the earnings threshold for employees to be classified as exempt from overtime compensation.  This will require that employers evaluate their systems for tracking time worked.  This change is just one of the many ways state and federal regulators are elevating their oversight of how employers compensate their non-exempt employees.  To minimize compliance risk, employers need to evaluate their systems for tracking time worked and appropriately pay overtime to eligible employees.

The complexity of managing and paying employees in today’s highly regulated employment environment requires a comprehensive system that does not rely on the integration of separate systems.  Mosaic’s Workforce One platform has the payroll, time and labor, and human resources capabilities employers need, all housed on one database and one application.

Workforce One delivers enterprise-class time and labor management capabilities including:

• Sophisticated Pay Calculation Engine supporting more than 250 calculation rules
• Multiple-EIN functionality that supports employees working in more than one legal entity
• Custom Overtime Flags
• Approaching Overtime Email Triggers
• Multiple Time Collection Profiles
• Overtime Requests
• Daily/Weekly Overtime Reports and Notifications
• Discretionary Bonus Calculations
• Quarterly Salary Level Reporting
• Catch-up Payment Support
• Blended Hours Overtime
• Weighted Average Overtime
• Tipped Overtime
• Multiple Pay Rates – Individualized or Global Rate Tables
• Workday Breakdown
• Scheduling Application

How will the Department of Labor’s Overtime Rule impact your organization and what steps should you take to ensure compliance by December 1^st? If you have any questions about this new overtime legislation or would like to see how Mosaic can help you navigate it successfully, call (303) 645-4270 or visit www.mosaices.com. 

Helping Businesses Manage Overtime Costs in the Wake of FLSA Changes

You’ve likely heard a lot in recent news about the Department of Labor’s (DOL) proposed regulations that are expected to affect the Fair Labor Standards Act (FLSA) regarding new white-collar exemptions in the near future.

With minimal revisions since the FLSA was enacted almost 80 years ago, significant adjustments regarding overtime pay and minimum wage requirements have been proposed by the DOL. The DOL has proposed these updated regulations to better align with the present-day workforce and economic climate.

To put things into perspective, the current FLSA requirement states that an employee that makes at least $455 per week ($23,660 per year) either hourly or salary and who meet a duties requirement test is considered “exempt”. These exempt employees do not qualify for overtime pay. If passed, the DOL’s new regulations would require that:

• The minimum salary threshold to be $970 per week ($50,440 per year) in order to be considered exempt from receiving overtime pay.
• The salary threshold be updated annually to stay level with rising inflation and wage costs.

These new regulations would undoubtedly have a significant impact on most US businesses within the coming months. It would require employers to reassess their entire workforce classification as exempt/non-exempt, increase minimum annual wages of exempt employees, and track all hours worked by non-exempt employees. As a service provider, it is critical that you help to guide these businesses during these potential changes. By providing your expertise in conjunction with a workforce management solution, you can help your clients keep in compliance with the new FLSA regulations and control overtime costs.

You can reduce a business’ compliance risk and overtime costs by offering them a workforce management solution, complete with Time and Attendance, that accurately tracks and documents all employee hours worked, delivers proactive alerts that notify employers of employees breaching overtime, and includes insightful reporting capabilities for both ongoing analysis and proof of compliance.

In this recorded webinar, held on August 20, 2015, by ChrysMarie Suby of the Labor Management Institute and titled “Overtime Best Practices”, you’ll learn 10 helpful strategies to bring to employers for minimizing their overtime costs.

1. Define the department budget and address OT in hours & percent of Total Worked hours.
2. Identify a pattern for the use of resources developed from workload demand data.
3. Define and standardize terms & formulas with division of direct, indirect, education, orientation, and paid not worked benefit hours and FTE’s.
4. Clearly identify pay incentives, premium pay, bonuses, on-call/call-back.
5. Monitor OT for both “regular” and “EOS” or incidental occurrences & trend for use & abuse patterns.
6. Publish schedules with at least 85% of work from “core” employees in the unit.
7. Require managers to publish schedules with <5% “holes” where shifts didn’t meet target requirements.
8. Monitor for the 6 underlying drivers for OT bi-weekly & compare to specific criteria.
9. Identify a pattern for the use of resources developed from workload demand data.
10. Monitor for the Labor Management Institute’s Target Thresholds to Total Worked Hours.

To get more information on the Labor Management Institute’s 10 overtime best practices, please watch this recorded webinar.

Is your Company at Risk? 6 Factors used by the DOL to Classify your Sub-contractors as Employees

"The Department of Labor's Wage and Hour Division continues to receive numerous complaints from workers alleging misclassification, and the Department continues to bring successful enforcement actions against employers who misclassify workers," said a detailed document issued July 15.

The Administrator's Interpretation 2015-1 is from David Weil, who heads the Wage and Hour Division (WHD).  It elaborates on positions the agency has taken earlier on the employee versus independent contractor issue, citing many federal courts' interpretations of the Fair Labor Standards Act (FLSA).

Noting that the matter of improper classification requires a "multi-pronged approach," the WHD is working with the IRS and states to tackle misclassification.

"Economic Realities Test"

The definition of an employee is determined by six factors based which constitute an "economic realities test." At the heart of the factors is "whether the worker is economically dependent on the employer or in business for him or herself." The Administrator's Interpretation also states that, while all of the factors must be considered in each case, no one factor is determinative of whether a worker is an employee — not even the "control" factor (See "What is the Nature and Degree of the Employer's Control?" below.)

The WHD warns against applying the factors "in a mechanical fashion." Rather, they should be applied "with an understanding that the factors are indicators of the broader concept of economic dependence."

The Six Factors

Here are the six basic factors and how the WHD views their scope (though the agency cautions that some courts may consider other factors).

1. Is the Work an Integral Part of the Employer's Business?

The more essential the work is, the more likely the worker is to be economically dependent on the employer. It doesn't matter how many workers perform a particular task.

WHD uses the example of a call center. Answering calls is integral to a call center's business "even if it is performed away from the employer's premises, or at the worker's home."

Similarly, the work of a carpenter framing houses for a homebuilder is integral to the business. In contrast, work performed by a software developer on behalf of the same company on a program that "assists the company in tracking its bids, scheduling projects and crews" would not be integral to the business.

2. Does the Worker's Managerial Skill Affect His or Her Opportunity for Profit or Loss?

This gets at the question of whether the individual is truly running a business. For example, "a worker's decision to hire others, purchase materials and equipment, advertise, rent space, and manage time tables may reflect skills" that impact profit or loss, the WHD document states. If the worker's only way to affect earnings is deciding how many hours to work, that would indicate an employment relationship.

The document illustrates the principle by describing a worker who provides cleaning services for corporate clients. The individual "performs assignments only as determined by a cleaning company, does not independently schedule assignments, solicit additional work from other clients, advertise his services or endeavor to reduce costs." This appears to be an employment relationship.

On the other hand, if the worker does tasks such as negotiating contracts and deciding which jobs to perform and when, his exercise of such managerial skills is indicative of an independent contractor.

3. How Does the Worker's Relative Investment Compare to the Employer's Investment?

"The investment of a true independent contractor might ... further the business's capacity to expand, reduce its cost structure, or extend the reach of the independent contractor's market," the document states. WHD again illustrates the principle with an example from a cleaning business.

A company provides insurance, a vehicle and "all equipment and supplies" for the worker, does advertising for her and finds clients for her, yet classifies her as an independent contractor. Based on the size of the investment of the company, the company is likely her employer. Even if she occasionally brings some of her own preferred cleaning supplies, her investment must be compared to the company's investment.

If, instead, the worker "invests in a vehicle that is not suitable for personal use and uses it to travel to various work sites ... rents his or her own space to store the vehicle and materials ... [and] advertises and markets her services and hires a helper for larger jobs," that would support independent contractor status.

4. Does the Work Performed Require Special Skill and Initiative?

"A worker's business skills, judgment, and initiative, not his or her technical skills, will aid in determining whether the worker is economically independent," declares the WHD document. How does that play out?

The WHD offers the example of a "highly skilled" carpenter who provides services for a construction company. He doesn't choose his job site, the sequence of his work, order additional materials "or think about bidding the next job." This fact pattern doesn't support independent contractor status.

In contrast, a carpenter who "provides a specialized service for a variety of area construction companies, for example, custom handcrafted cabinets that are made-to-order, may be demonstrating the skill and initiative of an independent contractor," the WHD opines.

5. Is the Relationship between the Worker and the Employer Permanent or Indefinite?

Naturally, the more "permanent" the relationship appears, the more it looks like an employment relationship. But "permanent" doesn't have to involve years.

"Even if the working relationship lasts weeks or months instead of years," the document states, "there is likely some permanence or indefiniteness to it as compared to an independent contractor, who typically works on one project for an employer and does not necessarily work continuously or repeatedly for an employer."

However, the WHD cautions that the lack of permanence doesn't necessarily indicate independent contractor status. The key "is whether the lack of permanence or indefiniteness is due to operational characteristics intrinsic to the industry." For example, sporadic part-time work assignments provided directly by companies or staffing agencies doesn't preclude an employment relationship.

6. What is the Nature and Degree of the Employer's Control?

This assessment should be made "in light of the ultimate determination whether the worker is economically dependent on the employer, or truly an independent businessperson," according to the document. The worker "must control meaningful aspects of the work performed such that it is possible to view the worker as a person conducting his or her own business."

Moreover, that control can't just be theoretical. "The worker must actually exercise it" the WHD states.

Labels Don't Matter

The determination of employment status depends on the economic realities "and not the label an employer gives it." Just because a business asks a worker to sign a contract stating he or she is an independent contractor, and issues a Form 1099-MISC, doesn't mean the individual isn't an employee.

"This form simply indicates that the employer engaged the worker as an independent contractor, not that the worker is actually an independent contractor under the FLSA," the document states.

In light of the complexities of determining employment status the wise course of action would be to consult a legal professional if you are uncertain about how to classify the employment relationship.