Month-By-Month Guide to Preparing for the FLSA Exempt Pay Changes: Analyze Your Workforce

Over two months have passed since the Department of Labor announced the changes to the salary level for employees classified as exempt and we’re still getting a ton of questions on what the changes mean for fitness business owners. Read about the change here.

 Over the next several months, we’ll give you a few tasks on which to focus each month so you’ll be prepared for the December 1, 2016 launch.

August:  Analyze your current workforce. 

·         Review all employees and positions currently classified as exempt or those which you’re paying a salary and not requiring time records to be kept.

·         Review their job descriptions and duties to determine if these employees are currently properly classified (outside of the amount they’re paid).  If you can check off the majority of the following bullet points under the supervisory exemption (or make a case for an administrative exemption), your employee is properly classified as exempt.  If not, the position should be reclassified as non-exempt and be required to keep track of time.

·         Create a list of the positions which will need to be reclassified based on duties and those which will remain exempt. 

Supervisory:

  1.  Regularly supervises two or more other employees, and also
  2.  Has management as the primary duty of the position, and also,
  3.   Has some genuine input into the job status of other employees (such as hiring, firing, promotions, or assignments).

When considering a supervisory exemption, the DOL is very clear that the employee must have management as the primary duty of their job.  Below are typical tasks that would be included in management duties:

  • Interviewing, selecting, and training employees.
  • Setting rates of pay and hours of work.
  • Maintaining production or sales records (beyond the merely clerical).
  • Appraising productivity; handling employee grievances or complaints, or disciplining employees.
  • Determining work techniques.
  • Planning the work.
  • Apportioning work among employees.
  • Determining the types of equipment to be used in performing work, or materials needed.
  • Planning budgets for work.
  • Monitoring work for legal or regulatory compliance.
  • Providing for safety and security of the workplace.

A good rule of thumb is that if the person is deemed “the boss” or “in charge”, they are cleanly classified as management.  In the fitness space, the general manager, fitness director, operations manager, and (sometimes) assistant manager roles may be considered exempt.  The most frequent misclassification made in the fitness industry is for the sales role.  If an employee’s job duties are primarily inside sales, regardless of their title, they are not exempt. 

Administrative:

This classification includes employees who job duties are:

·         Office or non-manual work, which is

·         directly related to management or general business operations of the employer or the employer's customers, and

·         a primary component of which involves the exercise of independent judgment and discretion about

·         matters of significance.

It is not enough for the employee to perform office work.  They must regularly exercise discretion and judgement, with the authority to make independent decisions on matters which affect the business as a whole or a significant part of it.  In a fitness business, there are very few roles which would fall under this exemption.

There is also a professional exemption which carves out lawyers, teachers, accountants, and other roles not typical of a fitness business. 

While the change to exempt pay is a challenging one for employers, it presents a great opportunity to review the entire business for duties based compliance.  The new DOL guidelines will likely lead to closer scrutiny of employee misclassification in the future.  We’ll also likely see a rise in the number of plaintiffs’ lawyers focused on bringing suit against employers under wage and hour law violations due to misclassification.  These cases are some of the most costly to defend for business owners. Being proactive now can save you majorly in the future.

Next month:  Assessing salaries.