The Media Explains the New Overtime Rule, But Not Really

Way back in May when we started talking about the impact of the new overtime rule, a reader wrote in to say that the change was going to be no big deal. After all, those affected could be making more money, so why worry how you tell them -- they'll just get it. Analysis had indicated that the biggest impact, based on number of employees affected, would be in the South and some thought that in the rest of the country it would be a "no brainer."

But as time went on, it has become clear that many organizations are struggling with the shift. Many nonprofits who believe deeply in the legislation have had to strategize financially. And many public and private organizations are unsure of what to say to employees who are not affected by the change and may become restive because of it, let alone to those who are affected.

Here's why I'm bringing the topic up again. I think we in HR should see this as a beta test for future compensation communication efforts. This is one of the first times that the media is out in front of corporation communications on a compensation issue that affects your employees. With more wage legislation under discussion and the CEO Pay Ratio announcement looming, employees are going to be influenced by what the media has to say as much as what you and their company eventually tells them. Let's learn from what the media is up to this time around. As you can imagine, they could use some improvement . . .

Many people are briefed by their local newspapers and television station about these kind of issues, because these sources often offer a quick segment with summarized details and explanations of how a legislated change applies to their regular audience. However, when it comes to employment issues, the quality of the information can be variable.

First of all, the media is talking to the person on the street -- not necessarily an employed person -- so their information is a summary of all the possibilities. Next, they are employees, too, and are not expert in any angle of Total Rewards practices. Their reporting can really confuse or mislead your employees, who have to guess how the information applies to them. It's impossible for them to guess correctly, because all they've been given is an overview. Next stop, your door, where they may arrive angry, frustrated and not trusting your explanation because it doesn't match their media source.

Thinking I'm overblowing it? Check out this news story. First of all, the online title of the broadcast piece is: "Changes for Salaried Employees Take Effect on December 1, 2016." It's a great come-on, but so general as to not be really accurate. That doesn't mean the title isn't going to be noticed by many of your salaried employees and confuse or distress the ones who aren't affected. Notice, it also misses the whole point of the legislation -- that more people are now eligible for overtime.

Now  look at this example of how a quote from a member of the U.S. Department of Labor was handled in the report:

'"There's that salary level, that salary basis and then there's the job duties," Coleman-Lovelace said. "Those are the exemptions that are required to be salary level. If they are making less than the $913 per week, they're not considered a salaried employee."'

I could guess why the quote seems so garbled, why they didn't explain how the word "exemptions" apply and why they don't explain why exemptions relate to how compensation works until three paragraphs later. But the most important thing to notice is, who wouldn't be confused and a bit worried about that statement if they're making anywhere from $800 to $1,250 a week?

My suggestion: Read the news story linked above to see how some of the media struggle with these issues. Check around to see what's been announced on your local channels and in local papers. Become up-to-date on your employees' information sources. They don't read the DOL notices and hardly read the Wall Street Journal, but they are eager to know where their next raise is coming from.

Then plan your communications.

Margaret O'Hanlon, CCP collaborated with Ann Bares and Dan Walter to create the DIY guide to compensation leadership, Everything You Do (in Compensation) Is Communications. Margaret is founder and Principal of re:Think Consulting. She brings deep expertise in compensation, communications and leadership to topics like the CEO Pay Ratio, performance management and compensation implementation discussions at the Café. Margaret is a Board member of the Bay Area Compensation Association (BACA). Before founding re:Think Consulting, she was a Principal at Willis Towers Watson. 

Comments

[E. James (Jim) Brennan]

That was a terribly confusing news story you exposed for us to check out! Almost every quote from the DOL official cited in the TV news article link is either wrong or highly misleading. Scary.

Thanks for the important alert, Margaret.

[Harold]

The DOL estimates that it should take businesses about one hour to review data and ensure that their companies are compliant with the new rules. But some employers are taking issue with that estimate.

https://www.shrm.org/ResourcesAndTools/hr-topics/employee-relations/Pages/overtime-regulations-costs-.aspx?utm_source=SHRM%20Wednesday%20-%20PublishThis_HRDaily_7.18.16%20(17)&utm_medium=email&utm_content=September%2028,%202016&SPMID=&SPJD=&SPED=&SPSEG=&spMailingID=26639397&spUserID=ODYzNDQxODc3NTQS1&spJobID=884655753&spReportId=ODg0NjU1NzUzS0

[Tony Bergmann-Porter]

As Mark Twain said: If you don't read a newspaper you are uninformed. If you do read a newspaper you are misinformed.

[Karen Kervick]

Even the SHRM article is misleading as it states
"On Dec. 1, the federal annual salary threshold for employees exempt from overtime pay will double, increasing to $47,476 from $23,660. Employees who make less than the threshold must be paid time-and-a-half for any hours worked beyond the 40-hour workweek. If employers want workers earning below the threshold to remain exempt from overtime pay, they must bump these workers' salaries to at least $47,476."

While it is true that employees who are considered nonexempt must be paid time and a half, a nonexempt employee paid by salary has all hours worked built into their base salary. Their salary does not change based on the quality or quantity of work.

Therefore, employees who are paid salaried nonexempt do not have to be paid additional time and a half for any hours worked over 40. They only need to be paid the additional "half-time".

I have not seen this discussed. It is perhaps not a common pay status, but it exists and is an alternative to switching to hourly pay. There are pros and cons to both employees and employers.

Try explaining that to the masses, especially when you through in vacation or holiday time.

[E. James (Jim) Brennan]

That "fluctuating workweek" option that Karen references is a highly problematic exception closely monitored by the Feds and fraught with potential pitfalls. Not a routine practice, it is only permitted under rare but very specific conditions, as I understand it. Worth exploring, but be cautious!

[Harold Brown]

Respectfully, I do not agree with Karen's comments. I don't think Karen was referring to the fluctuating work week exception.

Nonexempt salaried, a very common group of employees, must be paid 1.5x for hours worked over 40 in a workweek, just like hourly, and subject to state laws.

Perhaps Ann Bares could comment here to add some weight.

[Harold Brown]

FYI.

While federal law allows employers to use the fluctuating workweek method, the same may not be true in your state. California, for example, does not recognize this method for calculating overtime. Check with your employment counsel before adopting a fluctuating workweek calculation for overtime to make sure it is permitted in all states where you operate.

http://www.wagehourinsights.com/2016/05/paying-a-fixed-salary-for-a-fluctuating-workweek-or-how-to-pay-half-time-overtime/

http://whdi.litcounsel.org/2012guideWAGE.pdf

[Karen Kervick]

To clarify, I was referring to both options "fluctuating work week" which does allow the 50% half time regular rate for OT and the regular salaried nonexempt option.

I confused the two though by indicating only the 50% OT rate is needed for both.

We do pay 1.5 for OT on our regular salaried nonexempt employees.

Interesting links, Harold, thanks for the follow up on the fluctuating work week.