Dear Business Owner,
In recent years, business people as well as HR professionals have scrambled to bring their businesses in line with the U.S. Department of Labor's (DOL) rules that define which white-collar employees are eligible for overtime pay and which are exempt from overtime pay.
The most recent change to the Fair Labor Standards Act (FLSA) regulations tried to make it simpler for you to decide which employees are exempt (not eligible for overtime) and which are nonexempt (eligible for overtime). Instead of clearing up the confusion the new rules are actually making things more difficult for business owners and are creating more disputes and lawsuits between employees and their employers.
A recent Business Week report said overtime litigation "has exploded nationwide," estimating that U.S. companies are now paying out more than $1 billion annually to resolve those claims. Add to that, the DOL added 250 new investigators to pursue wage-and hour violators. This is a 33% increase in their enforcement capabilities.
The biggest (and most costly) FLSA mistake an employer can make is classifying a nonexempt employee as exempt and not paying.
We suggest that you regularly evaluate each of your 'white collar' jobs to determine if it meets the new definition of an "exempt employee." If your employee's job duties change... take the time to re-evaluate your employees new job duties to make sure they are still an exempt employee. Also, stay current with your States employee classification rules. Some states, including California, have established their own rules for classifying exempt employees which may vary from the Federal rules.
Here is a quick reminder of the rules. The salary threshold for exempt employees has been raised to $23,660.00 a year. That means any employee earning less than $23,660 annually (or $455 a week) automatically qualifies for overtime pay. No exceptions!
On the other hand your "highly compensated" employees (those earning over $100,000 a year) are almost always precluded from earning overtime.
Then there's the "duties test'. The FLSA provides an exemption from both minimum wage and overtime pay for people employed as a qualified "executive", "administrative", "professional", "outside sales" employees and certain computer positions. Each exemption has a combination of control over their work, duties and tasks that must be performed by the employee, for the majority of their work shift, in order to qualify for the exemption.
In light of these changes, I recommend that you take some time to review you business, employee job duties and employee status before the DOL or a plaintiff's attorney forces you to.
Check out the website to see a more detailed explanation of the five exemptions 'duties test' or give me a call. I'll be happy to answer your questions.