Meat + Poultry - July 2016 - 100

LABOR

Developing
employment
Today, wage and hour lawsuits represent the largest
category of employment-related, class-action filings.
In spite of this, the US Dept. of Labor (DOL) recently
announced a revamping of the "white collar" exemptions
test, more than doubling the minimum salary threshold
for exempt employees. When the changes become
effective, employers can expect greater scrutiny and a
further increase in wage and hour lawsuits. It is therefore
important for employers to understand the upcoming
changes to the overtime rules and to begin preparing now.

GETTING SPECIFIC
Under the federal Fair Labor Standards Act (FLSA), in
order to classify a position as exempt from overtime
requirements (the so-called "white collar" exemptions),
generally that position must pass both a salary test and
a duties test. Currently, the salary test requires a weekly
salary of $455 per week ($23,660 per year). The duties test
depends upon the exemption, but typical duties to look for
include: directing and supervising the work of others; the
authority to hire, fire, and promote; non-manual work; and
exercising independent judgment and discretion.

Wage and hour complaints have
become the most commonplace
employment-based lawsuits.
Under the announced exemption revisions, the DOL
has proposed raising the salary test from $455 per week
to $970 per week ($50,440 per year). The DOL has also
proposed raising the salary threshold each year.

NEXT STEPS
The last time the DOL changed the standards for exempt
employees in 2004, the number of wage and hour lawsuits
increased from 3,617 in 2004 to 7,310 in 2007. The pattern
is alarming at best.
Considerations that should be examined include:
x The number of hours potentially affected exempt
employees currently work.
x Potential salary compression issues, where employees
end up making close to the amount their supervisors do.

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x How the new rules will affect employers across state
lines, since the DOL's proposed rule does not consider
differences in pay across regions.
x Any incentive payments or similar compensation.
If employees are re-characterized as non-exempt, nondiscretionary payments will affect their overtime pay.
x Employees may no longer have the ability to go above
and-beyond, perform outside of regular work hours, or put
in the extra effort to secure additional training.
x If employees routinely perform work at home,
including answering emails, this should be reviewed. Once
an employee is reclassified as non-exempt, routine and
minor work at home can constitute work time.

MORALE MATTERS
Employers should be aware of workplace morale and its
impact on productivity when deciding on any solution.
Simply re-designating previously exempt employees as
non-exempt can have negative effects. First, employees
might view this as a demotion, especially supervisors who
have worked their way up. Second, previously exempt
employees will likely lose schedule flexibility and benefits
provided only to exempt employees. Equally important is
their status in the workplace.

EXERCISING OPTIONS
Employers could also use alternative methods to help limit
the impact of the new regulations, such as the fluctuating
schedule or moving employees to non-exempt salaried
status. However, before making any changes, employers
should ensure that they are complying with both state and
federal law, which often have different requirements.
Whatever steps a company chooses to take, clear
communication with affected employees is paramount.
Some employees may need to be let go, some jobs may
need to be restructured, and some duties may need to be
absorbed across several jobs - all of these operational and
other changes will need to be carefully explained.
Wage and hour complaints have become the most
commonplace employment-based lawsuits, and a change
in the law frequently results in an increase in lawsuits
filed. By being proactive, understanding the new rules, and
taking action now, employers can limit their exposure.
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Meat + Poultry - July 2016

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