Questions and Answers About the New Overtime Rule Released May 18, 2016

I already pay all of my employees a salary, so I do not need to worry about this new rule, correct?

That is not necessarily correct.  Many employers were unaware that in order for an individual to be exempt from overtime, there are 3 requirements that must be met: 

1. The employee must be paid a salary;

2. The salary must meet the salary level test, which is set in the final rule at $47,476.  (Many employers ignored this test, because the previous level was $23,660, and most salaried workers performing exempt duties easily met this test); AND

3. The exempt worker must be performing exempt duties.

The new rule changes the second test, the salary level, but it has caused many employers to take a second look at the duties test as well. 

Why is the new salary level so high, none of my employees are paid that much! 

Congress originally passed the Fair Labor Standards Act in 1938, to guard against abuses in our industrialized society, with workers working long hours at minimal pay.  The law set minimum wage and overtime rules.  It included exemptions for those workers who performed higher level duties, who were paid at a level well above minimum wage.  The salary level was set to assure adequately compensation for those truly performing exempt work.  The Department of Labor places this threshold at the 40^th percentile of earnings of full-time salaried workers in the South, the lowest wage region.  The 40^th percentile is thought to be a dividing line between nonexempt and exempt workers.    

What about part time employees who occasionally work more than 40 hours in a week, do I need to pay them overtime?

There is no distinction between part and full time salary level, so part time workers who make less than the salary level and who work more than 40 hours in one week must be paid overtime.

Do I need to require all of my employees begin keeping time records?

If after an analysis of the workforce, some employees who have been considered exempt are making less than the salary level, you will be required to keep track of their hours and pay time and a half for hours worked over 40, even if they are paid a salary.  For workers performing exempt duties, and paid more than the salary level, you do not need to track their hours. 

What should my employee handbook say about overtime?

If you want to control overtime expenses, your handbook should clearly prohibit unauthorized overtime, require supervisor approval, require accurate recordkeeping, and provide for discipline for those who do not follow the rules. 

Will the rule apply to my business?

This rule will apply to all business that operate in interstate commerce and which are subject to the FLSA, which is virtually every business. 

We are a nonprofit, and I had heard they would exempt nonprofits, are we exempt?

There is no exemption or exclusion for nonprofit businesses.

Do we have to comply today?

The rule will go into effect December 1, 2016, absent an act of Congress.

Won’t Congress pass some law nullifying this rule?

That is unclear at this point, legislation has been introduced, but it is uncertain whether it will pass and become law. 

What do I need to do right now?

If you have not already, it is time for every employer to take a hard look at exempt workers.  There are several exemptions that could apply, and each one should be analyzed as compared to the work that your employees perform, to assure that they are exempt.  For workers under the threshold, you can do one of three things:  1. Make them nonexempt and start tracking hours and paying overtime. 2. Raise their salary to the salary level. 3. Prohibit overtime work (see above for handbooks).

Harassment Prevention Begins at the Top

Workplace harassment has likely existed since the beginning of the workplace itself.  Discriminatory animus against classes of people has existed since the beginning of humanity. Since the 1960’s, Title VII and related discrimination laws have required U.S. employers to take harassment prevention more seriously. As often happens, imposing minimum legal liability prompts responsible employers go further and implement best practices.  It is only through understanding human behavior & psychology, measured against the legal protections that exist, that employers can hope to eradicate this type of behavior in the workplace, or remediate the potential harm when it occurs.

In order to prevent harassment (harassment of all kinds-gender, race, national origin, religion, age, disability) employers need to know what causes or contributes to it.  A classic study of the causes and impact of sexual harassment in the workplace laid the groundwork for understanding the issue.  The study noted: “sexual harassment in organizations is primarily a function of organizational and job characteristics and is more profitably conceptualized and studied at the level of group culture and organizational climate.”  Employers often fail to recognize corporate climate as a legitimate and sometimes critical factor.
In order to effectively prevent harassment employers must be cognizant of what causes harassment.  It is not behavior that occurs without a context which supports it.  Consequently, employers should be familiar with the research on the causes of harassment in the workplace.  The preeminent study noted above identified the causes as  “organizational context” and “job gender context.”

The first factor is the one which address workplace culture as a contributing factor in harassment.   This includes such factors as:  1. How does the organization communicate its tolerance of harassment? Is it apparent that top leadership supports zero tolerance? 2. How does the organization handle complaints about harassment? Are they handled promptly, with sensitivity, and zero tolerance? 3. How does the organization protect against retaliation and encourage reporting? 4. How does the organization punish or correct those who harass? Higher levels of harassment were reported in cultures or climates that did not appropriately address these issues.

The incidence of harassment was even higher in male dominated cultures with job tasks seen as traditionally male oriented tasks. The conclusion of the study was that incidents of harassment cannot be separated causally from their organizational climate. Increasingly, studies on general workplace incivility have focused on how tolerance of incivility in the workplace can lead to defining a workplace as tolerating behavior that could lead to harassing behavior.

Recent research confirms these findings.  These studies teach us that “harassment occurred less frequently in groups whose members perceive that the organization’s upper levels will not tolerate such behavior as well as in more gender-balanced groups.” If an employee with a tendency to engage in this behavior perceives that the organization tolerates it, the organization will experience an increase in the behaviors. So what is the key to stopping harassment?  Start at the top by creating a leadership culture of zero tolerance.  Leaders need to trained in zero tolerance behaviors.  Leaders must strongly and publicly support zero tolerance policies.  Workforce training for all employees, conducted regularly, must reinforce zero tolerance, identify specific inappropriate behaviors, and demonstrate support for reporting violations, and eliminating the behavior.  Other factors that contribute to a supportive environment, which reduces harassment, are a sense of team culture, supervisor support, promotion opportunities, and supportive structure.  More recent studies show that an organization which seeks to eradicate bullying and incivility, and develop a more professional atmosphere, is less likely to see harassing behavior.

An organization seeking to prevent harassment must start at the top by instilling a leadership that reinforces all of these behaviors.  Top management commitment to a zero tolerance policy is the best way to prevent harassment from occurring.
Future articles will address some aspects of this topic, including effective training, retaliation prevention, prompt correction, and supportive systems