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Survey finds impending wage and hour exemption rule change causing employers to restrict work flexibility

October 31, 2016

By Michael Burns, courtesy of SBAM Approved Partner ASE

ASE is keeping our members up to date on what the US Department of Labor’s new exemption rule requires and what changes are happening because of it. Despite court challenges and legislative initiatives to curtain this regulation, employers are moving forward with evaluating jobs to make necessary classification changes in anticipation of the rule implementation December 1, 2016.  A “snapshot study” conducted by the compensation association, WorldatWork, finds in addition to the re-classification of jobs under the new rule, employers anticipate limiting workplace flexibility options.

Many employers have been complacent about proper Fair Labor Standards Act exempt classification. With the advent of these new rules many employers are realizing many positions they thought were exempt, really do not pass the exemption tests outlined by the federal regulations and may have been non-exempt all along. Classifying a position as exempt provided a lot of flexibility in work scheduling that did not require the cost of overtime. Non-exempt classification – not so much.

The WorldatWork found 49% of employers that responded to their survey anticipate decreased workplace flexibility for the affected employees.

The survey also asked employers when they intend to implement changes to meet the compliance requirements of the new regulations. 63% indicated they are planning to wait until December 1st or the pay period that includes the December 1st deadline to make any formal changes. 

The survey also noted that group bonus programs increased from 59% to 81% from 2010 to 2016 while individual incentives (other than sales) decreased during the same period from 67% down to 39% in 2016. Why is this a concern?  If bonus pay is non-discretionary, employees included in the bonus program that are now non-exempt must have overtime pay included when calculating the pay rate based on their regular rate of pay. 

The survey reports that 69% of employers said net costs either already did or will increase because of compliance with the new regulations. 

The WorldatWork survey also reported only 16% of organizations under 500 employees responding will raise salaries to meet the minimum exempt salary level test threshold. In larger companies (10,000- <40,000) only 6% will raise salaries to meet the regulations threshold.

WorldatWork’s Sr. Manager of External Affairs, Melissa Sharp Murdock, stated, “Employers are holding out hope that Congress will return after the elections and pass comprehensive legislation that will phase in the new overtime rules and eliminate the automatic updates.  Lawmakers need to know that doubling the standard salary level this quickly is going to produce real consequences like the loss of workplace flexibility for a large number of workers.”

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