The Department of Labor (DOL) recently updated the overtime compensation requirements, requiring businesses to pivot starting July 1, 2024. With the second round of employee salary level changes coming on January 1, 2025 and automatic baseline increases starting in 2027, it’s important to know how the overtime compensation change impacts internal operations.
In particular, these new rules may lead to compliance issues for companies with employees who work remotely. Let’s talk about the impact on companies with remote workers and why these new rules may increase their risk of noncompliance with wage and overtime rules.
Work From Home: A Double-edged Problem
Under the new legislation, accurate records of worked hours are imperative to maintaining compliance. It’s especially challenging to track hours for hybrid and remote workers. A number of variables could impact the accuracy of recorded work time and easily result in employees being underpaid or overpaid for their work hours.
Failure to record hours could result in legal trouble and undercompensated employees, while overestimated hours could lead to inflated payroll costs. To reduce overtime compliance consequences, it’s essential to understand proper context and a course of action. It starts with understanding the risks of non-compliance.
The Risks of Non-Compliance
With the rise of hybrid and fully remote positions, employees are enjoying greater hours flexibility than ever before. For employers this flexibility carries risk, especially with the updated overtime rules. For companies that fall out of compliance—whether from the new overtime rules or previous infractions—here are a few issues they may find themselves running into.
Business groups may face legal action if workers are not receiving proper pay for every hour they work. Improper compensation is a non-compliance with the Fair Labor Standards Act (FLSA) overtime provisions and can lead to major reparation. Companies found in noncompliance may be forced to pay back wages to employees denied overtime pay, like a Michigan restaurant. They were required to pay $45K in back wages after failing to pay overtime and maintain accurate payroll records.
In addition to back wages, the DOL may also impose fines and penalties for overtime rule violators. The District Court for the Eastern District of Pennsylvania required a Philadelphia agency to pay $49,434 in civil money penalties in addition to $129,697 in back wages. The DOL is cracking down on companies who fail to comply and or keep accurate records, and the crack-down isn’t limited to companies with in-person employees.
It’s common for hybrid or remote employees to perform work duties after-hours, like catching up on client emails, preparing for meetings, and other duties. The DOL’s overtime update makes tracking these duties more important than ever, as more workers now pose compliance risk for employers. Nonexempt employees, whether salaried or hourly, need to track every hour they work.
With so many moving parts to track, creating transparency through documentation is the key to compliance. For companies worried about how the new overtime rules may impact their business, here are a few things to consider.
Create Clarity Through Time Tracking
The right time tracking system is crucial to maintaining compliance. Intuitive systems remove many of the barriers of overtime management. Softwares like Attendance on Demand™ are versatile resources for time and attendance tracking, but regardless of which system businesses use, compliance should be one of the leading motivators.
Here are a few ways a time & attendance system can help companies maintain labor and overtime compliance for remote employees.
Error Reduction Through Automation
Instead of meticulously combing through all employee hours, a time & attendance system can examine data and identify inconsistencies. This could include issues like missing punches or exceptionally long shifts when someone forgets to clock out. Automatically being notified of these types of time tracking issues allows for more accurate bookkeeping, simplifying the task for managers before it gets out of hand.
Work Hours Transparency
Consistency makes for organized time-keeping. Easy-to-use employee tools make for simplified access to time-off requests, worked hours, and all timecard needs. In some cases, the software’s tools allow managers to easily identify which employees are nearing overtime and reallocate workloads to optimize company value.
Having access to straightforward, reliable, to-the-minute data helps managers make educated workforce management decisions without risking noncompliance.
Ensure Employee Understanding
The other key to reducing overtime compliance risk with remote or hybrid employees is education. Many employees may not be in-the-loop about how US labor laws are changing, but understanding why having them accurately track their hours is so important is crucial to getting employees on-board. Companies won’t have accurate hours tracking without their employees’ buy-in and consistent effort.
Here are two ways companies can help create clarity around overtime rule implementations for their employees and avoid legal issues.
Provide Training Resources
Comprehensive resources are a great medium for ongoing training support, especially for remote workers. The DOL has a variety of videos available online on different topics, including overtime and hours worked, that may be helpful.
It may also be beneficial to identify common issues employees could encounter and proactively offer solutions. This could include defining what qualifies as “work time” and which activities don’t count toward overtime. Explaining discrepancies they may run into and clearly defining approaches ensures consistent results that comply with regulations.
Employers may want to create custom resources to clearly define company or industry-specific challenges so employees are aware and have the tools to address them.
Regular Check-ins
Trust is a critical foundation for successful teams with fully remote or hybrid team members. Employing managers with good leadership skills is one of the most effective ways to build trust and a strong rapport within a team. Establish a regular cadence of check-ins: Monday morning huddles, bi-weekly check-ins, monthly round-ups, quarterly reviews, etc.
These touchpoints provide the opportunity to connect their number of work hours to their overall performance and productivity, making it easier to discuss misalignments early on (and nip them in the bud!).
Planning Ahead
Like most other policy areas, overtime regulations are a continuously evolving landscape that can be difficult for companies to keep up with. Companies addressing these areas now are investing in a secure future for their employees and their organizational compliance. With a well-defined time management process, organizations can prevent being impacted by severe legal problems due to noncompliance.
Interested in learning more about how to tackle these changes? Watch our recent overtime webinar, which dives more into the details.
