With Overtime Law Delayed, How Can Small Businesses Prepare?

What was expected to take place on December 1, 2016 was a change made to the Department of Labor’s Fair Labor Standards Act. This meant that more than 4.2 million workers within the United States would see an increase in their annual wages. However, a federal judge in Texas blocked the change for now, giving owners of businesses and their human resources departments additional time to make the appropriate changes to prepare for an impending increased payroll.

The proposed change to the act means that employees who are currently labeled as exempt and who are paid a straight salary of “X amount per year” would be eligible to receive overtime pay at the rate of time-and-a-half if they make less than $47,476 a year. This change could greatly affect the way small businesses operate as they will need to account for the possible increase in payroll of their employees.

Toppers Pizza*, a better-pizza company based in Whitewater, Wisconsin, and its Founder and President, Scott Gittrich, were prepared for the changes to take effect on December 1, but communication has remained lucid with employees should the change happen.

“We have met with every effected employee in the organization to let them know of the impending changes and how they will be affected,” Gittrich said. “We have the change in policies, rates and classifications set up and ready to be implemented should the current injunction be lifted.”

Toppers Pizza has taken proactive steps to assure that the company will be minimally impacted by what could potentially be a big change for other small businesses in the country. A crucial part to the preparation process was the company’s Chief Financial Officer, Kendall Richmond. Richmond has been making strategic moves for the company to be in full compliance with the overtime rule change.

“To comply with the impending changes, we anticipate moving most employees to an hourly, non-exempt status with more flexible schedules, which will benefit employees with varying schedules,” Richmond said. “For our exempt employees close to the $47,476 threshold, they’ll be seeing an ‘early bonus’ benefitting them and putting Toppers Pizza in compliance with the expected FLSA change.”

While there are some companies that will be prepared for the rule change (if it does happen), other companies may not be in the same position. MOOYAH Burgers, Fries and Shakes Chief Operating Officer Michael Mabry feels that while his company is readily-prepared, the rule change itself did not wholly factor in the effect it may have on the restaurant industry in America.

“I think the impending change will sneak up on a lot of people in the industry because I’m not sure there has been enough communication of the possible change,” said Mabry. “At MOOYAH Burgers, Fries & Shakes*, we made sure to get our game plan in place and we continue to communicate with our team members so we’re not scrambling whenever the change may be implemented.”

First, it is essential to establish how the company wants to compensate employees as the rule change looms in the near future. It has been shown that employees who are within a close reach of the $47,467 threshold can have their salary bumped up. While, for those employees who will not have their salary bumped, companies can switch them to an hourly wage, seeing a more flexible schedule while still being compensated similarly.

Small businesses need to make sure they are properly prepared, and though it may seem simple, communication will be key to assure the transition is smooth. Often times messaging can be lost in communication, so it is imperative that everyone within the company has a clear understanding of what is going to happen if the injunction is lifted.

“We are talking with our team members one-on-one because we feel that level of connectivity and attention to our employees is important,” Mabry said. “We are giving them all individual development plans to lay out a path for advancement and show them a way to a successful career with MOOYAH.”

By fully evaluating what the change means for a company, assembling a plan on how a company can continue to operate successfully with the change, and clearly communicating with all employees, a small business will incur the change successfully. It can’t be stressed enough how vital communication within the company is and will continue to be as the impending FLSA change looms for businesses in America.