Federal law by its nature enacts a big change, 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 affect the staffing industry in more equivocal ways, presenting challenges to businesses across the country. Here are the specifics of what your business should expect when it launches on December 1, 2016.
An overview of FLSA
Effective May 18, the FLSA revisions became law, changing the exemption requirements for workers eligible to receive overtime. The maximum threshold rose from $ 455 per week ($ 23,660 for a full year of work) to $ 913 per week ($ 47,476 for a full year of work). Jan On 1, 2020, there will be an automatic threshold increase based on the strength of wage growth with subsequent increases every three years.
The other two factors for employees to qualify for the overtime exemption have remained the same. Exempt employees, in addition to being below the $ 47,476 threshold, must also have:
1.) Predetermined and fixed salaries that do not depend on the quality or quantity of the work.
2.) Jobs where their main functions are executive, administrative or professional.
The end result is that more white-collar and blue-collar positions are subject to overtime rules. That puts the personnel industry in a precarious and complicated place. Let’s take a look at the implications for internal employees and any temporary workers on your payroll.
How the FLSA Affects Recruiters and Sales Teams
Different types of internal employees will be exempt in different ways. Often, there is no short and dry distinction about your overtime exemption. Take recruiters, for example. Two separate court cases have examined whether recruiters can be classified as exempt clerical 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 performed by Account Executives. In a California case, there were very stringent sales targets with less independence in policy setting and candidate oversight after placement. In that case, the court ruled that the former employee was not exempt from overtime.
In the Maryland case, the recruiter developed his own methods of maintaining his talent stream and eventually managed the contractors on assignment through monitoring and training. According to the criteria of the Department of Labor, its main functions could be classified as more administrative.
The differentiator in both cases appears to be the percentage of your work dedicated to clerical versus sales work. Any staffing company wondering whether or not its sales or hiring team is subject to the revised overtime exemption is better off doing an audit of employee duties. In any situation where recruiters no longer qualify for the exemption, the employees in question should be reclassified as soon as possible. Hesitation threatens subsequent penalties or litigation.
How the FLSA Affects Temporary Workers
The temporary employee classification also includes its own challenges. Since in most temporary or contractual arrangements the staffing company remains technically the employer, there is a potential liability in misclassifying the overtime exemption.
As in the previous situation, the first step is to audit existing employees to see if they belong to one of the exempted executive, administrative, or professional categories. Employees who are disqualified by the new regulations must be reclassified immediately.
Additionally, staffing companies 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 the way they monitor time cards because any oversight of timesheets has the potential result in an exponential increase in overtime payments.
Why Staffing Software is Important for FLSA Compliance
Since there are no signs that the law is going to change, staffing firms must be equipped with the proper tools to monitor nonexempt employees in a streamlined way. Timesheet web portals need to be clear for candidates, clients, and recruiters to understand so they can be put on hold as temps approach overtime. That way, the impact of the FLSA will be minimal at most.