The DOL’s change in the federal overtime rules requiring a higher salary threshold ($47,476 paid annually) for employees to qualify as an exempt employee takes effect December 1, 2016. This Friday’s Five discusses five final checklist items California employers should consider when reclassifying from exempt employees to nonexempt employees.
1. The DOL rule changes are still going into effect December 1, 2016.
This week, a few people asked me if the DOL changes are still going into effect since Donald Trump was elected as president. Mr. Trump is unable to change the DOL’s rule that requires exempt employees be paid $47,476 in an annual salary until he is inaugurated as president. Therefore, employers still must comply with this deadline.
2. Notice to Employee may be required.
Section 2810.5 of the California Labor Code requires employers provide notice to employees of their rate(s) of pay, designated pay day, the employer’s intent to claim allowances (meal or lodging allowances) as part of the minimum wage, and the basis of wage payment (whether paying by hour, shift, day, week, piece, etc.), including any applicable rates for overtime.
The law requires that the notice is provided to employees at the time of hiring or within 7 days of a change if the change is not listed on the employee’s pay stub for the following pay period. The notice must be provided in the language the employer normally uses to communicate.
Employers should carefully review the need to provide the notice to employee given any reclassification of employees from exempt to a nonexempt employee. A template Notice to Employee can be downloaded from the DIR’s website here.
3. Consider how the change will be communicated and documented with employees.
Employers should explain to employees who are being reclassified from exempt to nonexempt about how they will be paid. The notice should inform workers they will be paid overtime for work over 8 hours in a day and over 40 hours in a week. The communication should also explain any changes in bonuses (don’t forget that nondiscretionary bonuses must be figured into the employee’s regular rate of pay for overtime purposes) and benefits. Finally, the communications should set out the different duties the employee may be required to perform given the change in classification.
4. Meal and rest breaks.
In addition to communicating the change in pay to employees, the company should also distribute its meal and rest break policy. The company should distribute any meal and rest break forms to the employees who are being converted to nonexempt that are normally given to new hires.
5. Off the clock and timekeeping policies.
Finally, employers need to implement compliant timekeeping policies to ensure that all nonexempt employees clock in and out for all work time. In addition, California requires that employers record when nonexempt take their meal breaks, and any reclassified employees must understand this requirement. Employers need to be careful about allowing employees who are reclassified as nonexempt to continue to use a company cell phone or laptop, as now any work performed once they leave the office must be compensated. Employers should consider limiting nonexempt employees’ access to company cell phones, e-mail, and computers to avoid off the clock claims.
Any reclassification and audit regarding the proper classification of employees should be done with caution, as there are many different issues to consider that are outside of the scope of this article.