The Department of Labor’s New Overtime Rule

I originally posted this in September 2015, but have updated it now that the new Labor Department overtime rules are going to become effective in the near future.

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In March 2014, the president directed the US Department of Labor to update key regulations for white-collar workers who are covered by the overtime and minimum wage standards under the Fair Labor Standards Act (FLSA) Act. In July 2015, a Notice of Proposed Rulemaking was published in the Federal Register for the purpose of soliciting public comments on the rule. The 98-page (!) document is available for review here.

The result of the proposed rule change will be to require employers to pay workers for after-hours activities that they are required to perform, such as checking email, being available to deal with company emergencies, or responding to a manager’s inquiries. Currently, employees who earn more than $23,660 per year (about $11.38 per hour) are exempt from these rules and can be required to work after-hours for no additional overtime pay. The current rule, last updated in 2004, would raise the exemption level to $47,476 (about $22.83 per hour). The new rule will add more than four million additional employees to those already covered.

Here is what I believe will be some of the implications of this new rule:

  • There will be a need to block employee access to a variety of corporate systems for employees whose salaries are below the Labor Department-imposed threshold. These systems include email, SharePoint, CRM systems, corporate social media, corporate instant messaging, VoIP, and any other communication or collaboration system that could possibly be used to respond to a manager’s inquiry, a customer request, a server alert, or that can be used for any type of work activity. One email server vendor, Alt-N, has already implemented a “Do Not Disturb” feature that will allow companies to turn off email during non-working hours so that they can be compliant with the new overtime rules.
  • The alternative, of course, is to simply pay employees for the additional time they work beyond 40 hours each week, but that creates problems that many organizations may not want to address, and it could add dramatically to labor costs. For example, if an employee checks email after work hours, will they be required to log their time spent doing so? Would this include informally checking email if they wake up in the middle of the night?
  • Access control will have to be appropriately linked between HR and IT so that employees who are below the Labor Department-mandated threshold will be prevented from accessing corporate systems during non-work hours. When an employee’s salary reaches the government-mandated level, however, then access can be turned on for these individuals.
  • There will be instances in which an employee whose salary is below the threshold will temporarily be required to work after-hours (such as an administrative assistant covering for his or her manager when he or she is out sick) and so access management capabilities will have to be in place to turn these capabilities on and off quickly to ensure that the employee can fulfill his or her job requirements. This will necessitate a tie-in to HR systems to guarantee that the employee is compensated appropriately for after-hours work.
  • Larger companies will have to maintain even tighter controls to prevent violations of the law for the same employee roles if compensation for these roles differs. For example, according to Indeed.com a customer service representative in New York City makes $60,000 per year and so will have the Labor Department’s permission to access email and other corporate systems after-hours without the need to be paid extra. However, the same job title in Wichita, Kansas makes $40,000 per year and so will not be allowed to do so without receiving overtime pay. What this means is that employees in more expensive labor markets will have freedoms that their counterparts in less expensive labor markets will not have. It also means that employees with more experience and who are paid a higher salary could have access to corporate systems while their less experienced and lower paid counterparts could not.
  • While some employers abuse their employees’ time and expect them to work after-hours for no additional pay or other compensation, there are employees who actually want to work after-hours. For example, some enterprising employees looking to impress their boss or their clients might want to catch up on email before going to bed simply to get a jump on the next day. Some might want to respond to a European or Asian customer’s inquiry in the middle of the night to satisfy that customer as quickly as possible. However, only employees whose salary is above the Labor Department’s threshold will be permitted to do these things on their own time.
  • IT will need to make special accommodations for traveling employees. For example, an employee based in California who travels to Virginia might want to check his or her email at 7:00am local time. However, because his or her email access is restricted until working hours begin in California, accessing email could be impossible until 11:00am local time (8:00am California time) unless the employee has pre-arranged with IT to implement a temporary rule change to accommodate his or her presence on the east coast.

In my opinion, employees should have the right to access corporate systems whenever they want to do so. And employees in Wichita should have the same options available to them as their counterparts in New York, as should less experienced/lower paid employees who work alongside their more experienced/better paid co-workers.

All of that said, it will be essential for employers to be able to turn email and other corporate systems on and off based on this ruling. Not to do so could end up being very expensive.

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