Federal legislation, by its nature, enacts big changes, and the Fair Labor Standards Act (FLSA) is no exception. Any law that redefines overtime exemptions and extends overtime to 4.2 million workers will have a powerful effect on countless companies. However, the new federal overtime law will impact the staffing industry in more equivocal ways, creating challenges for businesses across the country. Here are the details of what your business should expect when it goes live on December 1, 2016.
An Overview of the FLSA
As of May 18, revisions to the FLSA became law, changing the exemption requirements for workers eligible to receive overtime. The maximum threshold was raised from $455 per week ($23,660 for a full year of work) to $913 per week ($47,476 for a full year of work). January 1 On January 1, 2020, there will be an automatic threshold increase depending on the strength of wage growth with subsequent increases every three years.
The other two factors for employees to qualify for the overtime exemption remain the same. Exempt employees, in addition to being below the $47,476 threshold, must also have:
1.) Predetermined and fixed wages that do not depend on the quality or quantity of work.
2.) Jobs where your main functions are executive, administrative or professional.
The end result is that a greater number of both white-collar and blue-collar positions are subject to overtime rules. That puts the staffing industry in a precarious and complicated place. Let’s discuss the implications for internal employees and any temporary workers on your payroll.
How the FLSA Affects Recruiters and Sales Teams
Different types of insiders will be exempt in different ways. Often, there is no clear distinction about your overtime exemption. Take recruiters, for example. Two separate court cases have reviewed whether recruiters are classifiable as exempt administrative employees. Depending on state regulations and the different types of tasks they completed, the court made different decisions.
One of the key divisions is the number of high-level administrative functions that account executives used to perform. In one case from California, there were very strict sales targets with less independence to set policies and monitor candidates after placement. In that case, the court ruled that the former employee had not been exempt from overtime.
In the Maryland case, the recruiter developed its own methods to maintain its talent pool and eventually managed the assigned contractors by supervising and mentoring them. According to the criteria of the Department of Labor, his main functions could be classified as more administrative.
The differentiator in both cases seems to be the percentage of their work devoted to administrative work versus sales. Any staffing company wondering whether or not its sales or recruiting team is subject to the revised overtime exemption is better off conducting an employee duties audit. In any situation where recruiters no longer qualify for the exemption, the employees in question must be reclassified as soon as possible. Hesitation threatens penalties or further litigation.
How the FLSA Affects Temporary Workers
The classification of temporary employees also includes its own challenges. Since in most temporary or contract arrangements, the staffing company technically remains the employer, there is potential liability in misclassifying the overtime exemption.
As in the previous situation, the first step is to audit existing employees to see if they fall into one of the exempt executive, administrative, or professional categories. Employees who are disqualified by the new regulations must be promptly reclassified.
Additionally, staffing businesses with employees who no longer qualify for the overtime exemption will find clear time-tracking systems essential. Staffing companies will need to be proactive about how they monitor timecards because any neglect of timesheets has the potential result of an exponential increase in overtime payments.
Why Staffing Software is Important for FLSA Compliance
With no signs of the law changing, staffing firms need to be equipped with the proper tools to monitor non-exempt employees efficiently. Timesheet web portals need to be clear for candidates, clients, and recruiters to understand, so the brakes can be slammed on as temps approach overtime. That way, the impact of the FLSA will be minimal at best.