Overtime and the FLSA: How Employers Can Comply More than 80million American workers are currently entitled to overtime compensation under federal law. A surprising number of employers are dangerously ignorant of overtime requirements and how those requirements affect them. The federal law requiring employers to pay overtime to employees is the Fair Labor Standards Acts (FLSA). Generally, the law requires most employers to pay overtime to employees who work more than 40 hours in a given workweek at a rate of one and one-half times the employee’s regular rate of pay. The US Department of Labor (DOL) revised the rules redefining which employees are eligible for overtime pay nearly two years ago and now the DOL is aggressively pursing violators, and employees are learning their rights. In 2005 the DOL awarded $119 million in back wages to nearly 189,000 for overtime claims. The biggest mistake employers make is classifying nonexempt employees as exempt. It’s important to be aware of the updated rules. The Update Rules: Now employees that earn less than $23,660 annually (or (455/week) now automatically qualify for overtime pay. The outdated previous salary threshold was $8,060. The rules also create a new exemption for “highly compensated” employees meaning almost all employees earning over $100,000 a year will be precluded from earning overtime. Employees that meet the new salary test must also meet the “duties test” to be considered exempt. Executive exemption: These employees must perform the primary duty of managing or operating a business or department, must direct at least two employees, and have the ability to hire and fire. Administrative exemption: These employees are exempt if their main job is performing office work related to the management of the business. The job must also involve “the exercise of discretion and independent judgment.” Profession exemption: To qualify for the “learned professional” exemption, an employee’s primary duty must consist of performing non-manual work requiring advanced knowledge and work that is “predominately intellectual in character” and requires discretion and judgment. To qualify for the “creative professional” exemption, the employee must perform work that requires “invention, imagination, originality or talent in a recognized field of artistic or creative endeavor.” How Employers Can Audit Their Compliance: Evaluate Each Job: On a regular basis, evaluate each white collar position in your company in order to determine if that position meets the new definition of an “exempt” employee. If a particular employee’s status changes, reclassify that employee as soon as possible. Be “In the Know”: Make sure your HR people and supervisors are aware of the updated rules so they can work together to determine which positions may be classified as ‘exempt”.
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