Are you ready for overtime changes?
07 DECEMBER 2015 8:34 AM
Have you started strategic discussions about the effect proposed overtime regulations in the U.S. will have on your hotel? If not, now is the time to start.
By now I’m sure most of us have completed our 2016 budgets, but how many of you have started strategic discussions about the effect the proposed overtime regulations in the United States could have on your hotels?
If not, now is the time to start.
On 30 June 2015, the U.S. Department of Labor released its proposed changes to the overtime regulations under the Fair Labor Standards Act. If adopted, these changes will affect roughly 4.6 million current salary-exempt employees. While this will affect all segments of the American workforce, given the pay scales of our industry, hoteliers will be significantly affected by these changes, making more employees eligible for overtime compensation.
Under the current regulations, to be eligible for the overtime exemption employees must meet the duties and responsibilities tests under one of the administrative, executive, professional and/or computer professional exemptions. In addition, they must be paid a minimum weekly salary of at least $455 per week (or $23,660 per year).
The new federal overtime plan would increase the minimum weekly salary of $455 per week to $970 per week or $50,440 per year, a 113% increase. This change also would include automatic periodic increases to the salary threshold.
This means that regardless of the duties and responsibilities test, if a salaried employee makes less than $970 a week, he or she would no longer be considered exempt for overtime compensation. Hours would need to be tracked and overtime paid for every hour worked in excess of 40 per week.
As a leader in the hospitality industry, this should have your full attention.
- Read more: “The real meaning of new overtime rules”
The comment period for the proposed changes ended 4 September 2015, and we should expect to receive the final ruling sometime early to mid-2016. Once released, the changes will be effective within 60 to 120 days. And while we don’t know whether the DOL will adopt the current proposal or bring a new idea to the table, we should expect some changes to the salary threshold, as its last increase was in 2004.
So what can we do now? Sticking our heads in the sand and hoping it will go away is not an option—as they say, “change happens.”
I’m not an attorney, nor do I pretend to play one, so I stay informed on this issue through legal bulletins and webinars hosted by national law firms to help us all keep up-to-date on the proposed changes. Many of these are available at no cost. If you aren’t receiving some sort of legal update today, sign up for one or two.
- Read more: “Overtime rule could hurt US hotel employees”
Prepare your organization
Now is the time to start looking internally at your own organization and understand what the potential implications could be. Last month I attended a webinar presented by Jackson Lewis. Below are some suggested action items that you can do now to prepare your organization.
Review your current salary-exempt employees and identify those whose base salary is less than $50,440. These are the folks who potentially will lose their exempt classification. Take a look at your assistant manager positions. For select-service hotels and smaller full-service hotels, review your department managers.
Once you identify those who fall into the “at-risk” category, then you can begin to have discussions and determine your organization's strategy if these proposed changes become law. Consider these points:
- Are there salary-exempt employees who are close to the new salary threshold that you might consider bumping up compensation levels for to maintain exempt status? Ensure they will continue to meet the duties test.
- For those employees who will be reclassified to non-exempt status, you will need to determine your strategy for converting to an hourly rate. Will the new hourly rate account for whether the employee will continue to work the same number of weekly hours and is overtime a factor if you anticipate they will be working more than 40 hours?
- If you want to minimize overtime, will additional staff need to be hired to provide operational coverage?
- It’s not uncommon that our salary-exempt employees are checking emails and/or taking calls outside of working hours. For those converted to non-exempt status, this will now be considered compensable time. How will you track and/or how will your work processes change for your organization to ensure employees are not working off the clock?
- Consider the impact to those team members who will be reclassified; often “salary status” is perceived as having importance within the organization. It will be critical to engage these employees and explain why the changes are taking place to ensure their perception remains positive and that they continue to bring value to their respective roles within the organization.
Consult with legal counsel to assist you in this process to ensure that you are in compliance. These proposed changes could trigger the launch of more audits; the DOL will want to ensure compliance.
Finally, follow the old scout motto and be prepared. Start getting familiar with the possible overtime changes so you can understand what’s keeping HR professionals up at night as the increase to the labor expense is looming large.
Not only do you need to review the federal requirements, but you also will need to look at the state(s) and localities in which you operate. There are areas that have different thresholds and/or duties tests for exempt status (e.g. California), so be diligent.
Christine Andrews, SPHR, SHRM-SCP, vice president of human resources for Hostmark Hospitality Group, is responsible for the direction of Hostmark's human resources/employee relations division. She has previously held human resources positions at several of Hostmark’s managed properties, and while with Hostmark has implemented many human resources programs for client properties. Andrews serves on the advisory board for Kendall College and AH&LA's Educational and Certification Advisory Board, and she is an active member of the Society of Human Resources Management and Council of Hotel and Restaurant Trainers. Andrews received her bachelor's degree from the University of Nevada, Las Vegas, where she majored in Hotel Administration, and holds a Master's degree in Hospitality Management from Roosevelt University. You may reach Christine at firstname.lastname@example.org.
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