Via: Construction Executive, By: Lori Brown
In recent years, the Department of Labor (DOL) has taken the position that due to a “particularly competitive” environment, pay practice violations are rampant throughout the construction industry. Previously, the DOL mostly cited issues related to “off-the-clock” work, travel time and poor record keeping.
Adding fuel to the fire of the industry’s already challenging compliance environment, the DOL and White House recently announced major changes to the nation’s overtime rules that take effect on Dec. 1, 2016. These changes will likely impact the exempt status of employees in supervisory positions in construction companies and will require decisive action.
For an industry already squarely in the sights of the DOL, these new rules add more challenging payroll dynamics for construction executives to manage. Following is a list of what’s changing.
- The DOL more than doubled the minimum salary level from $23,660 ($455 weekly) to $47,476 ($913 weekly) to classify white collar employees as exempt from overtime.
- To keep pace with wage growth and inflation, the $47,476 minimum salary level will automatically adjust every three years.
- Employers have the option to satisfy the minimum salary requirement by including up to 10 percent of bonuses and incentives.
- The salary level for highly compensated employees will increase from $100,000 to $134,004 annually.
Notably hidden in the DOL’s published guidance is the begrudging concession that few employers will simply hand over thousands of dollars to those currently salaried employees who fall beneath the new threshold. It’s far more complicated than that. The economic reality will force most employers to do the math in hopes of finding their “sweet spot” or, in other words, the optimal balance of operational efficiency, employee morale, tolerable financial impact and compliance.
PRACTICAL STEPS TO COMPLIANCE
With the Dec. 1 deadline approaching, business owners in the construction industry must quickly decide who goes into the following buckets.
1. INCREASE SALARY ABOVE $47,476
While companies will invariably apply different criteria here, many are seemingly starting with the math. They are reserving this option for the population of positions both closest to the new threshold and most critical to the organization. For example, if 30 percent of a construction company’s exempt population falls below the new threshold, they might set their internal break at $40,000 and then engage in further discussion around criticality of position and financial feasibility.
For those increased to the new salary level, it is more important than ever that they also meet the duties tests required to sustain that exemption. If an entity is prepared to financially invest to meet the new threshold, failing to ensure that individual or position meets one or more of the white collar exemptions is unwise, if not irresponsible.
With the deadline approaching, few companies have sufficient time or budget to conduct the required duties analysis through traditional methods and can instead rely on technology to power or accelerate that often time-consuming piece.
2. RECLASSIFY TO NONEXEMPT, OVERTIME ELIGIBLE STATUS
For workers whose salaries will not be increased to meet the new threshold, business owners can reclassify or convert these individuals or positions to non-exempt. This option presents a whole host of different considerations, including how best to carefully communicate that message and how to go about implementing those operating rules and policies. How do you limit overtime? How do you communicate what’s expected of people who have likely, for many years, enjoyed life with very important titles, who haven’t punched the time clock and who have grown accustomed to the personal flexibility that comes with exempt status?
Now is the time to construct a realistic and achievable plan with compliance at the forefront of that agenda. With the Dec. 1 deadline quickly approaching, technology can assist time-strapped decision-makers in ensuring compliance and limiting legal liabilities.
This is the first article in a two-part series on the key challenges facing construction executives in managing their workforce. Stay tuned for the second article on the use of independent contractors in the Sept. 1 issue of Managing Your Business.
Lori Brown is President and Chief Operating Officer of ComplianceHR, a web-based platform that helps companies make critical employment decisions, such as who can be retained as an independent contractor and which employees need to be paid overtime. She has more than two decades of experience as an employment litigator and in counseling organizations on employment law compliance strategies.