Federal Laws and Regulations
Overtime Rules
Summary of major points
ISSUED BY THE WAGE & HOUR DIVISION, U. S. DEPARTMENT OF LABOR
Published in the Federal Register, April 23, 2004
ENFORCED BY
Internal Revenue Service
REFERENCE
www.dol.gov/fairpay
www.dol.gov/elaws/esa/flsa/overtime
The Wage & Hour Division of the U.S. Department of Labor (DOL) issued new rules regarding overtime pay under the Fair Labor Standards Act (FLSA) of 1938. For the most part, they update white collar exemptions to mandatory overtime. All employers covered by the FLSA must comply with these new rules.
Effective date: August 23, 2004.
WHO QUALIFIES FOR OVERTIME PAY?
The salary threshold for overtime pay is $455 a week or $23,660 a year. The threshold is not indexed for inflation. An employee who is paid less than this amount must be paid overtime for more than 40 hours work a week regardless of title and job responsibilities.
All blue collar workers qualify for overtime regardless of salary level. Blue collar workers are defined as those who perform work involving repetitive operations with their hands, physical skill and energy. This would include FLSA-covered non-management employees in production, maintenance, construction and similar occupations such as carpenters, electricians, mechanics, plumbers, iron workers, craftsmen, operating engineers, longshoremen, construction workers and laborers.
Workers in specified jobs, such as accounting clerks and bookkeepers, also qualify for overtime regardless of salary level.
Employers must comply with state or municipal laws, regulations or ordinances that require a higher minimum wage or lower maximum work week than those established under the FLSA. They can also negotiate collective bargaining agreements that provide for a higher wage, shorter work week or higher overtime premium that those established under the FLSA.
WHO IS EXEMPT FROM OVERTIME PAY?
In general employees who meet the rule’s definition of an exempt executive, administrative, learned professional, computer professional or outside sales employee can be exempt from overtime pay. Most highly compensated employees – those earning at least $100,000 a year – are exempt from overtime pay if their regular and customary duties include at least one of the duties of exempt executive, administrative or professional employees. In addition to earning between $23,660 and $100,000 a year, exempt employees must meet two basic requirements: they perform exempt duties and they are paid on a salary basis.
Duties tests for the five categories of exempt employees are as follows:
Executive Exemption
The employee’s primary duty involves managing the company or a recognized department or subdivision of the company.
and
The employee customarily and regularly directs the work of two or more other employees.
and
The employee has the authority to hire or fire other employees or his/her recommendations on hiring and firing carry significant weight.
Administrative Exemption
The employee’s primary duty must include office or non-manual work that is directly related to management or general business operations.
and
The employee must exercise discretion and independent judgment with respect to matters of significance.
Learned Professional Exemption
The employee’s primary duty must require advanced knowledge in a field of science or learning acquired through specialized intellectual instruction.
and
The employee must consistently exercise discretion and judgment.
Computer Employee Exemption
The person must be employed as a computer systems analyst, programmer, software engineer or in similar skilled work and be primarily involved in designing, programming, consulting, documenting, testing, etc. The exemption does not cover employees who manufacture or repair computers and related equipment nor does it cover employees who use computers and related equipment in their jobs.
Outside Sales Exemption
The employee’s primary duty is making sales (as defined in the FLSA) or obtaining orders or contracts for services or for the use of facilities for which a consideration will be paid by the client or customer.
and
The employee must customarily and regularly work away from the employer’s place of business.
DISCLAIMER
The information provided here is designed only to alert retailers of possible obligations under the new DOL regulations regarding eligibility for overtime pay. It is not intended as legal or compliance advice. More information is available at www.dol.gov/fairpay or www.dol.gov/elaws/esa/flsa/overtime.