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Industry News: New Overtime Rules, Space Invaders
In this section:
Show Me the Money: New Overtime Pay Rules
If you’ve heard about the new overtime pay rules issued by the U.S. Department of Labor (DOL), you’re probably wondering how they affect your business.
The regulations were issued this April under the Fair Labor Standards Act and will go into effect on Aug. 23. Here’s a summary of the most significant changes:
- Definitions (or duties tests) have been revised for determining whether or not white-collar positions (executive, administrative, professional, outside sales and computer employees) can be classified as exempt from overtime pay. The duties tests are too detailed to list in this article, but are available on the DOL's FairPay Web site under “Fact Sheets.”
- Minimum salaries for exempt white-collar employees have increased. To be classified as exempt from overtime pay, they must receive a minimum salary of at least $455 a week or $23,660 a year. Under the old rules, exempt employees had to be paid a minimum of $155 a week or $8,060 annually.
- There’s a new classification for “highly compensated” employees (those that earn at least $100,000). They are exempt from overtime pay if they customarily and regularly perform at least one of the duties of an exempt executive, administrative, or professional employee identified in the standard exemption tests on the DOL’s Web site.
What Doesn’t Change
“Outside sales” employees are not affected by the revised minimum salary requirements. They can still be paid on commission without a guaranteed salary as long as their duties and work location meet the revised outside sales exemption test requirements found on the DOL’s Web site.
Non-management employees in production, construction and similar occupations like carpenters, electricians, plumbers and laborers are classified as blue-collar workers and are entitled to overtime pay. They are not exempt under the new regulations no matter how skilled they are or how much they earn. “They could possibly qualify for the highly compensated employee exemption,” says David Crump, director of NAHB’s Legal Research Program, “but that’s not very likely.”
Crump offers some tips for classifying superintendents and project managers, who seem to straddle the blue-collar/white-collar line:
- To qualify for overtime pay exemption under the new regulations, these employees must meet salary and duties tests under the executive or the highly compensated employee classifications.
- Required duties for the executive exemption include the power to hire and fire employees or at least weigh in on recommendations about hiring, firing, promotion or advancement.
- The administrative exemption involves office or non-manual work directly related to management or general business operations — a description that normally would not fit a superintendent or project manager with site-specific responsibilities.
What Does This Mean for Your Business?
“I don’t think [the new overtime pay regulations] will have much impact on the average home builder,” says Bob Whitten, vice president of SMA Consulting in Colton, CA, and a member of NAHB’s Single Family Small Volume Builder Committee. “Administrative staff earning less than $23,660 a year are usually paid by the hour and rarely get more than 40 hours per week. Most field labor is contracted, so there is minimal impact there.”
Whitten is right that the regulations probably won’t affect a sea change in home builders’ and remodelers’ operations. However, you should take the following steps recommended by CCH, Inc.’s Health and Human Resources Group to manage payroll costs and make sure you’re in compliance with the new overtime pay regulations:
Identify employees who learn less than $23,660. Evaluate whether payroll costs will best be controlled by raising their salaries to retain their exempt status (provided they still meet the duties tests for their positions) or budgeting for overtime pay.
Conduct job analyses. Determine which employees perform administrative, professional and executive duties as defined by the revised duties tests.
Crump points out that the definitions for administrative employee exemption have changed to “more of a position of responsibility.” It’s important to familiarize yourself with the duties tests and, if necessary, ask your lawyer for help in interpreting them. You can also call the DOL’s toll-free Wage and Hour help line Monday through Friday 8 a.m. to 5 p.m. at 866-487-9243, or use the online form to ask questions.
“Employers have to be careful of classifications, which they did under the old rules,” says Lucy Katz, vice president of customer service and client development for Austin, TX-based Katz Builders, and a member of NAHB’s Single Family Small Volume Builders Committee. "You need to make sure the classification meets the job description. That’s why it’s so important to have written job descriptions.”
Revise job descriptions. After you perform job analyses, revise job descriptions accordingly. Make sure the descriptions truly reflect the work performed and skills required.
Work closely with payroll. Make sure your payroll system is updated to accurately reflect exempt and non-exempt classifications, and that overtime is paid accordingly.
Develop a communications strategy. Some employees may shift from exempt to non-exempt status under the revised rules. They may be happy about the prospect of earning overtime pay, or they may simply feel demoted. You have some pretty sensitive information to give them, so choose your words well. Be sure to communicate to all of your employees how valuable they are to your company.
One More Thing…
Learn about local laws. Some states have enacted overtime pay laws. When an employee is subject to both the state and overtime laws, he or she is entitled to overtime pay according to the higher standard (that is, rate of pay). The DOL’s Web site includes a map that details minimum wage and overtime pay requirements for specific states.
Whether you’re writing job descriptions for the first time or are revising your current ones, get a copy of Job Descriptions for the Home Building Industry, Third Edition. It contains 40 job descriptions for home building industry employees, plus sample company organization charts, job description forms, electronic documents on CD, and other tools. Order it from BuilderBooks.com by calling 800-223-2665.
I Need My Space!
Recently, Opinion Research Corp. surveyed 400 adults who had remodeled in the past few years. Most of the findings came as no surprise: schedule problems and messy jobsites ranked as the top two complaints. Rounding out the top three was “invasion of personal space.” While it is inevitable during a remodeling job to disrupt personal space, remodelers can take steps to ease their client’s concerns. On top of being conscientious about the homeowner’s “space” also be very upfront with them about what will happen, who will be there and when.
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