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Rethink who earns overtime; feds rewrite rules

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in Leaders & Managers,Management Training

The long wait is over. Now, it's time for you to act.

More than a year after proposing changes to the rules that define which employees are eligible for overtime pay, the Labor Department has issued final rules.

As a result, by Aug. 23, you'll need to analyze each white-collar position in your company to see how it fits under the new Fair Labor Standards Act (FLSA) definitions of "exempt employees" (not eligible for overtime) and "nonexempt employees" (eligible for overtime).

With these clearer rules, it will be simpler to decide who is due overtime and who is exempt, which should reduce your legal risks. Downside: You could be forced to shell out more overtime pay to lower-paid professional workers.

Here's a summary of the new rules. For details, access our E-visory report (see box at right).

Salary threshold raised to $23,660. Employees earning less than $23,660 annually (or $455 a week) now automatically qualify for overtime pay, regardless of their duties. Previous law set the salary threshold at $8,060.

The rules also create a new exemption category for "highly compensated" employees. Essentially, it says that any employee earning more than $100,000 a year and who regularly performs even one exempt duty will be precluded from earning overtime.

Duties test revised. Employees who meet the salary test and are paid on a "salary basis" must also meet the "duties test" to be considered exempt from overtime pay. The final rules simplify the horribly outdated duties test for people performing white-collar jobs. The new tests:

1. Executive exemption. To be considered exempt executives, employees' primary duties must be managing a business or department. They must direct at least two employees and have hire/fire authority (or their hire/fire recommendations must carry "particular weight").

2. Administrative exemption. Administrative employees are exempt if their main job is performing office or nonmanual work that's related to the employer's management or operations. Their job must involve "the exercise of discretion and independent judgment."

3. Professional exemption. To qualify, an employee's primary duty must be performing nonmanual work requiring advanced knowledge, defined as work that is "predominantly intellectual in character" and requires discretion and judgment. To qualify for the "creative professional" exemption, employees must perform work requiring "invention, imagination, originality or talent in a recognized field of artistic or creative endeavor."

The new rules also define the exemptions for outside sales employees and computer workers. (See E-visory report.)

Free E-visory report:

'Complying With the New Overtime Rules'


For a detailed description of the newly revised exemption rules, access a copy of our free E-visory report, Complying With the New Overtime Rules, at www.research-recs.com/extra.

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