Monday, April 11, 2016

Winter is coming … for the FLSA’s salary test

00827909In case you’ve been living in the dark for the past year, the FLSA’s salary test is due for some changes, and the changes are coming soon. The latest intel suggests that the reguations—which will increase salary-level at which employees will qualify for the administrative, executive, professional, and computer employee exemptions from $23,660 per year (or $455 per week) to an expected $50,440 per year (or $970 per week)—will publish in July with an effective date in September.

Last week, the George Mason University’s Mercatus Center published a comperehensive analysis of why these new regulations will be detriemental to employers and employees. The report (pdf here, h/t Overlawyered) is well worth your time if you are interested in a solid analysis of the intended and unintended consequences of adding an estimated five million additional workers to the rolls of the non-exempt.

I’d like to focus on one such unintended consequence—lack of workplace flexibility.

From the report:

If employers are forced to record and measure employee hours, they will shift away from allowing employees to telecommute because the cost of monitoring hours for telecommuting is significantly higher, although not impossible given new technologies. The proposed regulation would create a scenario whereby telecommuters have an incentive to work overtime because they would get paid 1.5 times the regular rate and, knowing this, employers have an incentive to make sure employees do not work overtime. A mechanism will be needed by which the employer is able to track the work hours of employees such that the employer knows when an employee is working overtime. Showing up at work and clocking in is the mechanism by which employers normally track employees’ hours. With telecommuting, it is difficult for an employer to track the number of hours worked. As a result, employers may require telecommuters to start physically showing up for work so that they to track and monitor the number of hours these employees work.

Employees like being exempt. They like the flexibility of not having to track their hours. They like the flexibility that comes with a salary that compensates an employee for all hours worked in week, whether it’s 30 hours this week, or 65 hours next week, or 47 hours the week after. The new regulations will strip five million employees of this flexibility, and convert them to time trackers. Does this change benefit employees? I bet if you polled the five million, you’d find that most would prefer to keep their flexibility instead of trading it in for whatever minimal additional compensation (if any) they expect to recover from a switch to non-exempt.