Welcome to the May edition of the HR Advisor Newsletter. We’re continuing to focus on the upcoming changes to the FLSA white collar exemptions. This month, we have another article and guide on the FLSA changes, plus an HR Cast on the topic that will be added to our Support Center on the 15th.
HR Alerts
With California and New York implementing statewide plans for a $15 an hour minimum wage, we can expect other states and likely more cities to propose their own minimum wage increases soon.
The push for a $15 minimum wage has been around for several years. Demonstrations in favor of it began in November of 2012, when fast-food workers in New York City walked off their jobs in protest of their low wages. While 29 states and the District of Columbia have minimum wages above the federal requirement, and several have passed significant increases in the last year or two, the federal minimum wage of $7.25 hasn’t been increased since 2009. Since then, it has lost close to ten percent of its purchasing power due to inflation, according to the Pew Research Center. Analysts, such as the National Employment Law Project, say that the rate of $15 per hour is slightly above the cost of living in many cities and note that four in ten employees in the U.S. make under that amount.
No city or state currently has a $15 minimum wage for all employees, although the states of California and New York will be working towards that number. Some cities and states that have passed incremental increases to reach a $15 minimum wage will only apply them to certain kinds of workers. Massachusetts, for example, has a planned statewide increase to $15, but only for home health care workers. Cities with a planned $15 minimum wage for all non-exempt employees include Seattle (by 2017 for businesses with at least 500 U.S. employees and by 2021 for others), San Francisco (by 2018), the District of Columbia, and Los Angeles (both by 2020).
The largest concern for business owners is that they will be unable to afford the increase. Some owners say they may have to downsize their workforce in order to pay the required rate and still cover other costs, and that the loss of employees may bring a loss in revenue. Critics of minimum wage increases point to studies that show a connection between an increase to the minimum wage and a rise in unemployment. Supporters point to studies that indicate raising the minimum wage to $15 an hour nationally would result in nearly half a trillion dollars being pumped into the economy, giving millions of Americans more purchasing power and stimulating hiring in the process.
What comes next? In the short term, additional states might consider raising the minimum wage for certain workers or for all non-exempt employees. And as efforts to raise the federal minimum wage above $7.25 have so far failed, a national increase to $15 is for now almost certainly out of the question. In the long run, the political pressure behind the $15 minimum wage will likely increase as the cost of living continues to rise and more cities and states set $15 an hour as the new minimal standard.
Be sure to check the News Desk in the HR Support Center for information about specific state minimum wage increases!
FLSA Exemption Changes – Policy and Practice Updates and the Golden Rule
Last month we discussed dealing with the pay issues surrounding employees who may not make enough to be classified as exempt under the new rules. The article can be found in the Articles section of the Support Center if you’re interested, and the corresponding FLSA Decision Making Guide can be found in the Guides section. But aside from figuring out how to reclassify employees while protecting your bottom line, you’ll also want to consider a number of policies and procedures that apply to non-exempt employees, and whether they should be updated or added to your employee handbook or other operating manual.
Let’s take a look at a few of these key policies, keeping in mind the Golden Rule of wage and hour: non-exempt employees must be paid for all time they are “suffered or permitted” to work. This doesn’t just mean time in the office, but all time, whether approved by the employer or not.
The biggest issue we foresee when it comes to dealing with timekeeping, and ultimately wage liability, is changing the habits of formerly exempt employees so that they aren’t “running the clock” after hours. Many employees, particularly those who may have been exempt for years, will be used to responding to work email, finishing up projects, taking client calls, or doing other work tasks during non-work hours. And while we don’t expect these employees to intentionally cook up wage and hour claims as soon as they are reclassified, we do want to be sure that your policies are clear about 1) your expectations with respect to off-the-clock work and 2) your commitment to recording all time worked by non-exempt employees. With that in mind, let’s look at a few specific policies that you’ll want to implement if you don’t have them already, and that you’ll want to reemphasize with newly non-exempt employees if you do.
Timekeeping: If you don’t have some kind of timekeeping policy in writing, now is definitely the time to create one. The policy here can be modified to suit whatever system you use, whether paper time sheets, a punch clock, or an app. It can also be modified to specify how long before or after a scheduled shift employees must clock in or out. Here’s an example:
“All non-exempt employees are required to use the time clock system to record their hours worked. Should an employee miss an entry into the timekeeping system, the employee will notify their manager as soon possible for correction. Employees may not ask another employee to clock in or out for them.
Employees should clock in no sooner than five minutes before their scheduled shift and clock out no later than five minutes after their scheduled shift. Additionally, employees are required to clock in and out for their designated lunch periods, which are unpaid time when employees are relieved of all duties. The length of an employee’s lunch period should be approved by their manager. Waiver of the lunch period requires prior approval of the employee’s manager.
Non-exempt employees are not permitted to work overtime or unscheduled time without prior authorization from their manager. This includes clocking in early, clocking out late, and working through the scheduled lunch period.
Accurate time reporting is a federal and state wage and hour requirement, and employees are required to comply. Failing to enter time into the timekeeping system in an accurate and timely manner is unacceptable job performance.”
Off-the-Clock Work: Make sure employees know that they generally should not be working off-the-clock, but if they are (hopefully with permission) that time should be recorded. Consider a policy like the following:
“Non-exempt employees must accurately record all time worked, regardless of when and where the work is performed. Off-the-clock work (engaging in work assignments or duties that are not reported as time worked) is prohibited. No member of management may request, require, or authorize non-exempt employees to perform work without compensation. This includes checking email on personal devices after work hours.”
Bring Your Own Device (Use of Personal Devices): We recommend a policy that addresses use of employees’ personal devices such as phones, tablets, and laptops. You can customize something like this:
“Non-exempt employees are not authorized to use their personal devices for work purposes unless they receive authorization in advance from management. This includes but is not limited to reading, sending, or responding to work related e-mails, sending text messages, and answering or initiating phone calls.”
Meal Periods and Break Periods: Many states requires meal and/or break periods for non-exempt employees. Check your state requirements on the HR Support Center and make sure you’re offering and enforcing these rest periods. Sometimes these breaks can be waived by the employee if they choose to do so and if they sign a written waiver, but check your state laws before offering this option, as it may not be allowed. If an audit revealed that employees were skipping lunch and you had no evidence that it was their choice, you could find yourself in hot water with the Department of Labor. In most cases, it’s advisable to make employees take their legally protected breaks, even if they’d rather work through them. In addition to being a best practice on the compliance front, an abundance of research has shown that employees are more productive on the whole when provided with breaks during the workday.
Overtime: Now would be the time to ensure that you’re familiar with your state and local overtime laws. Although most employers will only be subject to the federal requirement to pay time and a half for hours worked over 40 in a week, Alaska, California, Colorado, Florida, and Nevada all have daily overtime, and Massachusetts and Rhode Island require some employers to pay a premium for work on Sundays. Whatever your state requires, make sure your managers are aware of the rules and that you’re prepared to comply.
There may be more policies specific to your business or industry that require attention in light of the upcoming changes, but these should provide a good starting point. How to communicate, or re-communicate, these policies is up to you. A handbook update might be in order if it has been awhile (don’t forget to have employees acknowledge the new version), or a company-wide meeting or email may suffice; in fact, all three wouldn’t be a terrible idea. Keep in mind that once you have these policies in place, you’ll need to enforce them fairly and consistently, even if that means stopping a formerly exempt employee from doing things they want to do that are also useful to you, like checking and responding to their work email over the weekend. Likewise, repeated violations of these policies should result in corrective action. This may present a challenge for both employees and employers at first, but ultimately everyone will adjust to the new rules and hopefully find some new efficiencies along the way.
For more information about updating policies, communicating changes, and generally dealing with the non-financial impacts of this change, check out our new FLSA Implementation Guide, which can be found in the HR Support Center under the Guides section.
Question & Answer
Q: Can we bring on unpaid interns for the summer?
A: Unpaid internships are permissible if they meet very specific criteria, but employers should proceed with extreme caution.
The Department of Labor has a six-part test for determining whether interns may be unpaid. As a best practice, we recommend that you use unpaid interns only if all six of these criteria are met:
The internship is similar to training which would be given in an educational environment;
The internship experience is for the benefit of the intern;
The intern does not displace regular employees, but works under close supervision of existing staff;
The employer that provides the training derives no immediate advantage from the activities of the intern; and on occasion its operations may actually be impeded;
The intern is not necessarily entitled to a job at the conclusion of the internship; and
The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.
If all of the criteria listed above are met, an employment relationship will not be deemed to exist under the Fair Labor Standards Act (FLSA). Without an employment relationship, the intern will not be considered an employee, and thus the Act’s minimum wage and overtime provisions will not apply to them.
In addition to the Department of Labor’s criteria, a U.S. Court of Appeals ruled in 2015 that “the proper question is whether the intern or the employer is the primary beneficiary of the relationship.” The Court then used a seven-point list very similar to the Department of Labor’s to evaluate the circumstances as a whole.
Be aware that misclassification could be very costly and include back pay, back taxes, penalties, and attorney fees. If you are unsure about your decision to bring on unpaid interns, we’d suggest you err on the side of paying them. If you do decide that your internship program qualifies to be unpaid, document exactly how your program meets each criteria.
A final thought: it is important to note that workplace protections like the Civil Rights Act, the ADA, OSHA, and many state-specific laws apply to interns, whether paid or unpaid.
Managing Your Managers
As business owners, executives, and supervisors are all aware, managing employees is one of the hardest parts of running a business. You must balance their strengths and weaknesses, their personalities, and their skill sets, all while trying to earn and maintain their loyalty. And then, like a marching band conductor, you must bring them all together so they’re working in unison for the success of your organization—each member playing the right note, at the right time, from the right location on the field.
Managing your managers is no different. They act as your section leaders, training and directing those in their departments, and providing coaching and encouragement as needed. But they still need direction from the highest level. You’ve still got to pick the music and write the drill.
The principal reason to manage your managers is to ensure that they operate as a team. Each of your managers has a distinct personality and approach to management that affects their leadership style.
One may be deadline-driven, another prone to dawdle. One may focus on building their team’s strengths, another on correcting their team’s weaknesses. One may communicate a lot, another only a little.
These differences can work, but they can also cause trouble. Employees who report to or work with more than one manager may not know what is expected of them. Or they may find themselves overworked if managers don’t coordinate workloads. Cross-team efforts may be delayed or even ruined due to misunderstandings or failures to communicate (imagine the tubas and the piccolos trying to inhabit the same space on the field). The organization may be guided by several conflicting personalities instead of a single, unified company culture.
To bring managers together, you need something to unite them around. This is your company culture—the personality of the organization, its mission and values, working environment, policies and practices. But a company culture can’t exist in the abstract. It needs flesh and bone. So have your management team develop a set of shared goals and priorities—and make sure they’re specific, measurable, attainable, relevant, and time-bound (aka SMART goals). Think of this as your musical score.
Of course, you won’t have much of a half-time show if everyone isn’t on the field, instruments in hand, and ready to play. Hold regular management meetings to ensure managers are working well together and that their teams are working well together. In other words, confirm everyone’s on the same page. These meetings should have clear objectives, provide managers a chance to work through conflicts, and give you an opportunity to coach them. This would also be an opportune time to ask managers what they need from you and from one another.
Even if your managers are talented and can be trusted to lead their teams, it still helps to direct their management efforts towards a singular purpose. Even a band with top notch section leaders will be improved by a skillful conductor. Likewise, to coax the best results out of your organization, ensure that you give your managers ample direction and the tools they need to lead their teams to success.
