What the New Federal Overtime Law Means for Staffing Firms

  By Terri Roeslmeier  |    Tuesday November 30, 2016

Category: Expert Advice, Technology, Trends


Federal legislation by its nature enacts vast 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 potent effect on countless businesses. Yet the new federal overtime law will impact the staffing industry in more equivocal ways, providing challenges to firms nationwide. Here are the specifics of what your company should expect when December 1st, 2016 rolls out.

An FLSA Overview

As of May 18th, revisions to the FLSA were signed into law, changing the exemption requirements for workers eligible to receive overtime. The maximum threshold moved upward from $455 a week ($23,660 for a full year of work) to $913 a week ($47,476 for a full year of work). On Jan. 1st 2020, there will be an automatic threshold increase depending on the strength of wage growth with subsequent increases every three years.

The other two factors for employees to qualify for overtime exemption have remained the same. Exempt employees, in addition to being below the $47,476 threshold, need to also have:

1.) Predetermined and fixed salaries that are not dependent on the quality or quantity of work.

2.) Jobs where their primary functions are executive, administrative, or professional.

The end result is that a greater number of both white collar and blue collar positions are becoming subject to overtime rules. That puts the staffing industry in a precarious and complicated place. Let’s break down 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 cut and dry distinction about their overtime exemption. Take recruiters, for example. Two separate court cases have reviewed whether recruiters are classifiable as exempt administrative employees. Depending on the state regulations and the different types of tasks they completed, the court made different decisions.

One of the key divisions is the amount of high-level administrative functions that the Account Executives conducted. In a California case, there were very strict sales targets with less independence on setting policy and supervising candidates after the placement. In that instance, the court ruled that the former employee had been nonexempt for overtime.

In the Maryland case, the recruiter developed her own methods for maintaining her talent pipeline and eventually managed contractors on assignment by monitoring and coaching them. According to the Department of Labor’s criteria, her primary duties could be classified as more administrative.

The differentiator in both cases appears to be the percentage of their work dedicated to administrative versus sales work. Any staffing firms wondering whether or not their sales or recruiting team is subject to the revised overtime exemption are best served conducting an audit of employees’ duties. In any situation where recruiters no longer qualify for exemption, the employees in question need to be reclassified as soon as possible. Hesitation threatens penalties or litigation later.

How the FLSA Affects Temporary Workers

The classification of temporary employees includes its own challenges as well. Since in most temporary or contract arrangements the staffing firm technically remains the employer, there is a potential liability in overtime exemption misclassification.

As in the previous situation, the first step is to audit existing employees to see if they fall into one of the exempt executive, administrative, or professional categories. Employees who are disqualified by the new regulations need to be reclassified promptly.

Additionally, staffing firms with employees that no longer qualify for overtime exemption will find clear time tracking systems to be essential. Staffing firms will need to be proactive about the way they monitor time cards because any neglect of timesheets has the potential result in an exponential increase in overtime payments.

Why Staffing Software Matters to FLSA Compliance

Since there is no sign the law will be changing, staffing firms need to be equipped with the right tools to monitor nonexempt employees in a streamlined way. Timesheet web portals need to be clear for candidates, clients, and recruiters to comprehend so that the brakes can be pumped as temporary workers approach overtime. That way, the impact of the FLSA will be minimal at most.

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