Employers aren't the only ones with major concerns about the changes to wage and hour laws mandated by the Department of Labor (DOL).
Millions of employees across the United States are waiting anxiously to learn how they'll be affected by the new Fair Labor Standards Act (FLSA) regulations. And the way business owners approach their fears and questions can mean the difference between a smooth transition and sinking morale, attrition, and even lawsuits.
Whether you choose to bump salaries and maintain employees' exempt status, reclassify employees to non-exempt status, or a mix of both measures (the most likely scenario) it's critical that you communicate clearly and address concerns proactively.
Thomas Burke of Buck Consultants
HR expert Thomas Burke of Buck Consultants, LLC (a Xerox Company) discusses your employees' top fears and questions about the new FLSA rules—and how you can address them.
1. Why is this happening now?
Let your employees know that significant regulatory changes could take effect at any time requiring you to restructure and reclassify some employees to stay within compliance.
Emphasize that your goal is to make the best of this situation in doing right by your employees financially while also keeping the company in good health.
Keep the focus of this conversation on the government, and help employees understand that while your hand has been effectively forced to make these changes, you have made every effort to keep employees whole financially.
2. Is it legal to reclassify me as non-exempt?
Assure employees that reclassification from exempt to non-exempt is indeed legal.
The Department of Labor—which exists to protect employee rights—wants more employees to fall within the non-exempt category. In other words, the DOL wants more employees to be eligible for overtime so that employees' time is protected. This way, if employees are required to work in excess of 40 hours in a week, they are rewarded accordingly with overtime pay.
3. Is my reclassification a demotion?
This is one of the most common questions you may encounter as an employer. Let employees know that this is a reclassification for compliance reasons and not a reduction in responsibilities or downgrade due to poor performance. Take the opportunity to express your appreciation for the employee's contributions to the company, and refer to Question #2 for reassurance that the government intends this reclassification to be a positive change.
4. How will this affect my job?
This is an important question, especially for employees who are being reclassified as non-exempt. If your employee is accustomed to working 50 hours each week—and will now be required to stick to 40, for example—you'll need to clearly address how the employee's workload will change.
You also need to clarify which activities are considered “work.” If your employee is used to constantly checking in via Smartphone or email to stay in touch after hours, it's important to talk about new expectations—since these tasks are considered work. Ignoring or encouraging these activities as off-the-clock work can result in a lawsuit.
5. Does my reclassification mean a pay cut?
When this question arises, focus the conversation on your efforts to keep your employee whole. Let your employee know that while you may not be able to pay him or her more, you have made every effort to comply with the new regulations while ensuring that the employee maintains the same take-home pay. This might mean reclassification or a recalculation of hourly wage to account for overtime.
6. Does my reclassification mean that I no longer qualify for benefits like PTO and health insurance?
The answer to this question will depend in part on employer policy and in part on the Affordable Care Act (or ACA). In general, under the ACA most employees will still qualify for health benefits if they work at least 30 hours per week. Reassure employees that these benefits are not going away, and that coverage is still available to them.
PTO is a different matter that will be determined by your company's policy. Now is a great time to revisit this policy to ensure that it can be applied fairly to both exempt and non-exempt employees.
7. Why am I being reclassified but my co-worker isn't?
This can be an extremely tricky conversation. Avoid getting into the nitty-gritty of your decisions, and instead focus your conversation on the need to approach each employee's situation individually. Assure your employee that decisions about reclassification were made on an individual basis according to the law and the new overtime rule.
8. Do I need to track my hours now?
Your employee might not think to ask this question, but it's an important one to answer nonetheless! If your employee has been reclassified as non-exempt, he or she will need to track all his or her hours now—and you'll need to keep records of those hours for a full two years.
Make this transition as simple as possible by offering an easy way to track and submit hours. An online time tracking system is one of the best ways to allow employees to track hours easily and accurately, and has the added bonus of easily accessible electronic records in case of a dispute or inquiry from the DOL.
Leah Reynolds of Buck Consultants
Leah Reynolds, Employee Engagement and Communication expert with Buck Consultants, offers employers advice for best practices in addressing employee concerns and implementing changes:
1. Communicate, Communicate, Communicate!
And then communicate again! Keeping employees informed and taking time to have thoughtful conversations on an individual basis will keep rumors, misconceptions, and fears from running rampant. A good rule of thumb: When you think you've communicated enough, you'll know you're about halfway there.
2. Handle Conversations Individually
Recognize that everyone will react differently to the news that they are being reclassified, so be sure to handle each discussion on a personal basis. Be prepared for a possible range of reactions.
3. Prepare Your Employees Now (And Pay Attention to State Laws)
The sooner you can give employees a heads-up about changes that will affect their schedules, job duties, and positions with the company, the better. Nobody likes surprises when it comes to work, and the heads-up will be appreciated.
Keep in mind that in many states, advance notice isn't just courtesy—it's required. Laws vary by state and city, so be aware of when and how you're required to notify your employees of a change in classification, pay, or work duties. Don’t risk a lawsuit.
4. Review Policies
Now is the perfect time to review and reassess your company policies. Are they up to date? Do they meet your current needs? Take the time to communicate and review these policies with employees, especially when it comes to time tracking, expectations around overtime hours, and what's considered compensable work.
5. Have an Open Door Policy
Encourage employees to ask questions, and be responsive to those questions. The last thing you want is employees to see the changes as secretive or mysterious. While you may not be able to disclose everything, you can offer reassurance and honesty about decisions to do right by your employees and company.
6. Don't Be the Bad Guy
It can be helpful to remind employees that these changes are the result of a government mandate. It's understandable for employees to feel confused and disappointed about reclassification. Remind employees that as a business owner, you are required to comply with all new regulations that the DOL enforces.
7. Don't Get Distracted
It can be very tempting to base your decisions and communication strategy on what everyone else seems to be doing, but ignore this impulse. Instead of paying attention to what everyone else is doing, follow your legal counsel's advice, stick with the DOL's rules, do right by your employees and company, and listen to your HR director.
8. Focus on Employee Value
Reiterate the value of your employees! There's never been a better time to let your employees know how important they are to your company. A quick note of thanks, well-deserved praise, and an increased focus on incentives and opportunities for growth can be a great way to help your employees feel valued.
9. Focus on Keeping Paychecks Whole
If you are reclassifying, focus on the concept of "keeping your employees whole." While it may not be possible to raise your employee's salary and keep his or her status as exempt, you can structure an hourly wage or a salary (employees can still be salaried without being exempt) to ensure that your employee stays "whole" and receives the same take-home pay.
10. Weigh the Costs
Keep in mind the cost of recruiting and possibly replacing an employee as you make any decision or approach any conversation. Is this a deal-breaker for a particular employee? Is it worth a few thousand dollars in annual salary to lose this employee when you consider the high cost to replace him or her?
11. Prepare for Difficult Conversations
Recognize that no matter what you do, reclassification or other changes caused by the new FLSA rules could be a hit on morale. Respect this, and maintain efforts to keep a positive and healthy company culture.
You may already have had your head down preparing for the new FLSA rules to take effect! Just remember to also take time to inform your employees—the people at the heart of the matter—about any changes.
While the DOL's new rules aren't a popular topic among business owners, they're here to stay for the time being. Make the best of the situation by keeping communication lines open, approaching conversations individually, and arming yourself with information to lay the groundwork for a smooth transition.
About the Experts
Tom Burke is a Principal and the Career Practice Leader of Xerox HR Services consulting group, Buck Consultants. In this role, Tom serves as the firm’s leader of compensation and talent management consulting services. He is accountable for client and employee satisfaction and retention, business development and growth, oversight of projects and client relationships, staffing, team collaboration, as well as resource and financial management.About Leah Reynolds
Leah Reynolds is a principal with the employee engagement practice at Buck Consultants, LLC, a Xerox Company. She partners with clients to create employee engagement, change management and strategic communication solutions. Leah has developed change and communication strategies in the context of virtually every type of business transaction and organizational transformation. She anticipates the impact and implications of change, and crafts change management and communication plans to minimize business disruption and ensure stakeholder commitment.Back to Resource Center