What the New Overtime Pay Rules Mean to You
Barring any legislation to the contrary, starting on August 23, 2004, new Department of Labor rules on overtime pay take effect. These changes under the Fair Labor Standards Act (FLSA) are the most sweeping revisions to the rules in more than a quarter of a century. Learn how they affect your business.
Low-wage employees
Any employee making less than $23,660 a year ($445 a week) is now eligible to collect overtime pay if he or she works more than 40 hours per week. This is an increase from the prior cap of $8,060 that had been in place since 1975 (if that figure had been adjusted for inflation, it would have been $28,060 today). The new wage threshold applies to workers at companies of any size – there is now exemption for small businesses.
Middle-income jobs
You may be required to pay overtime for anyone earning from $23,660 to $100,000. Overtime pay for this group of earners isn’t guaranteed. It depends on the job. It is not yet clear who is entitled to time-and-a-half within this group. It seems that retail workers, office workers (other than those specifically exempt), restaurant managers, paralegals and blue-collar workers (including contractors, plumbers, electricians and mechanics) are entitled to overtime.
For the sake of clarity, the new rules provide specific exemptions from overtime pay protection. These include pharmacists, funeral directors, embalmers, journalists, financial services industry workers, insurance claims adjusters, human resource managers, management consultants, executive and administrative assistants, dental hygienist, physician’s assistants, accountants, computer analysts, programmers, engineers, chefs, graphic designers and certain athletic trainers.
Highly-compensated employees
No overtime pay is required for highly compensated-employees – anyone earning $100,000 or more during the year. This takes into account bonuses, commissions and other compensation paid during the year. It does not include health coverage, retirement plan contributions or other fringe benefits.
The new rules do not change the definition of “highly-compensated employee” (other than increasing the compensation limit). Highly-compensated employees include only those who perform office or non-manual work. They must also customarily and regularly perform the duties and responsibilities of an executive, administrative or professional employee.
Bottom line
No one knows as yet what the impact of these new rules will be on small business. Some employees to whom you had been paying overtime may now be exempt, while some employees are now automatically entitled to it. We’ll keep you posted on further clarifications of the rules as they occur.
For links to a self-training seminar and fact sheets for specific jobs and occupations, go to the Fair-Pay Web site at www.dol.gov/esa/regs/compliance/whd/fairpay/main.htm.
Caution: At the time this issue went to press, Congress was considering a measure to block these new overtime rules and revert to the prior status quo. If there are any further developments, we’ll bring them to you in a future edition.
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