Have you reviewed your policies and practices in light of the upcoming overtime changes? Remember, reclassified employees may have to follow policies and procedures that didn’t apply to them before. (Or that you didn’t have at all!)
Changing habits can be a challenge, but changing those of your formerly exempt employees with respect to hours worked and tracked is critical to preventing wage and hour violations.
For example, newly non-exempt employees are likely used to “running the clock” after hours. They may be in the habit of responding to work email, finishing projects, taking calls, or engaging in other work tasks during non-work hours. Therefore, we strongly recommend you ensure your policies are clear about expectations and your organization’s commitment to recording all time worked by non-exempt employees.
Timekeeping
Consider that your previously exempt employees may not be familiar with your timekeeping procedures. These include things like tracking time to check emails or submitting a timecard for each pay period.
Review these procedures with them, keeping in mind that non-exempt employees must be paid for all time worked. This doesn’t just mean time in the office, but all time–whether approved or not.
Off-the-Clock Work
As mentioned above, all hours worked by a non-exempt employee must be recorded and compensated. (Even those performed outside of the employee’s standard shift!)
Additionally, your handbook should note that off-the-clock work is prohibited and that employees may be disciplined for not following their scheduled shift. However, keep in mind that as an employer, refusing to pay for unauthorized time worked (regular or overtime) is not permissible.
Personal Electronic Devices
Time a non-exempt employee spends doing work from their smartphone, tablet or personal computer is considered time worked. However, employees may find this hard to resist. Especially if their phone is chirping at them from their pocket every time a new work email comes in.
Therefore, you may want to prohibit a non-exempt employee from using their personal devices for work purposes at all. (Or only allow such use upon authorization from the company.)
For instance, if you’d like a particular employee to check and respond to work email over the weekend, build that time into their weekly schedule so it doesn’t lead to unexpected overtime.
Meal and Rest Periods
Many states require meal and/or break periods for non-exempt employees. It’s important to inform employees of these breaks, explain the procedures for clocking in and out, and remind them that no work should be performed during this time.
Employees who previously worked through lunch at their desks and could put in their eight hours between 9 and 5 might not want to take an unpaid lunch period or break. Unfortunately, state law may be indifferent to their feelings.
If employees ask to waive their meal or rest periods, you’ll want to check the Break and Rest Period pages under State Laws in the HR Support Center. Sometimes employees can legally waive these breaks, but other times they cannot.
Overtime
Now is the time to ensure that you’re familiar with your state and local overtime laws. Although most employers are only subject to federal requirements, some states have their own laws.
At the federal level, employers must pay time and one-half for hours worked over 40 in one workweek. However, Alaska, California, Colorado, and Nevada each have daily overtime provisions. Additionally, Massachusetts and Rhode Island require some employers to pay a premium for work on Sundays and certain holidays.
Employees and managers need to be aware of the rules for compliance. To mitigate compliance risk, employers should clearly communicate all expectations around overtime in their employee handbooks.
Travel Time
Since employers must pay non-exempt employees for all time worked, you may need to consider travel time for some employees. However, there are a few narrow exceptions when travel time isn’t payable. For example, when the employee is a passenger in a vehicle outside of regular work hours or a standard commute. However, it’s wise to assess your non-exempt employees’ travel schedules to ensure proper pay.
You may have difficulties with formerly-exempt employees used to working around-the-clock. Therefore, we strongly recommend you ensure your policies are clear about expectations. These include the organization’s commitment to recording all time worked by non-exempt employees.
Payroll Changes
Per FLSA requirements, overtime must be calculated weekly based on the employee’s “regular rate of pay.” Incentive pay is included in the regular rate of pay calculation.
Top Tip: Incentive pay includes non-discretionary bonuses, commissions, or any other non-hourly pay.
For weeks in which a non-exempt employee earns both overtime and incentive pay—whether provided at the time or retroactively—you must calculate (or recalculate) the employee’s regular rate of pay so that it includes both their base pay and incentive pay for the week. Employers should then use this new amount for overtime calculations.
However, every company must first establish a defined workweek for its overtime calculations. This is the 168-hour period during which you will track each employee’s hours to determine their pay and if they are owed overtime, e.g. Sunday at 12:00 am through Saturday at midnight.
Employers must assess each workweek individually for overtime calculations. Beyond this, they must pay overtime for each workweek in which it is earned. Payroll, managers, and employees should all know what your company’s set workweek is.
Next Steps
If you haven’t already covered these policies in your employee handbook, we recommend adding them now or distributing them separately as amendments. Once distributed, employees should sign-off to acknowledge their acceptance and understanding of these important policies.
If you’ve already covered these policies and procedures in your handbook, reemphasize them with the newly reclassified employees.
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