A new rule effective in January makes an additional 1.3 million American workers eligible for overtime pay, according to the U.S. Department of Labor.
The rule, years in the making and intended to account for average wage increases since the last significant change in 2004, raises the threshold for exempt workers (professional salaried workers). That’s good news for more employees who work more than 40 hours weekly, and more expensive for employers who must now cover the difference under the Fair Labor Standards Act (“FLSA”).
Overtime rate: It’s still time and a half, or 150 percent of hourly wage. If an employee is salaried, but not “exempt” under the rule, the salary must be whittled down to an average hourly rate (e.g., salary divided by 52 weeks a year, divided by 40 hours equals hourly rate).
Who’s eligible for overtime: As of Jan. 1, 2020 anyone making less than $646 per week, or $35,568 per year and works more than 40 hours in one week gets overtime (the old rate was $455 or $23,660). Each week stands alone; you can’t average two or more weeks. Plus, just as before, anyone making more than may nevertheless be entitled to overtime under the “duties test” — a case-by-case analysis.
Duties test/exempt: Salary is just the beginning. Certain jobs are “qualified” for exemption, meaning those employees don’t need to be paid overtime. The four basic categories for potential exemption, which apply only to people who make more than that salary threshold above, are:
• Manager/executives: If a worker manages two or more people and their duties are primarily managerial, they may be exempt. Title alone means little; it probably doesn’t apply to a fast food manager who wraps burgers or takes orders. If a worker has some higher responsibilities, but spends much of the day doing the same work as the staff he manages, he’s probably not exempt.
• Professional: Doctors, attorneys, CPAs and many other licensed professionals are exempt. Also included are educated or creative professionals who work independently, or independent contractors such as freelance writers, hair stylists, artists, etc.
• “Administrative professionals” means administrative functions such as IT, finance, or human resources — all generally exempt if they don’t make less than the threshold salary. The term doesn’t include administrative assistants and office helpers (who are almost all non-exempt and eligible for overtime).
• Outside sales: Emphasis on “outside.” Salespeople in a call center are generally non-exempt and eligible for overtime. Someone who sells the same product/brand on commission, meeting outside with clients most of the time, may be exempt. To be exempt, outside salespeople need to do the majority of their work outside the office.
Experts advise employers to keep careful records with employee time sheets or similar electronic program. The temptation to lower pay rates to account for increased overtime expense itself is not illegal, but it can create problems and resentment. That’s especially true if the result is uneven pay rates for similar work or unequal treatment (such as requiring some but not others to “clock in”).
The Fair Labor Standards Act is federal law and mandatory for all employers. It’s also a minimum; some states have set higher salary thresholds, making even more employees overtime-eligible. So far, Idaho follows the FLSA thresholds.
To learn more, click “Idaho labor laws” at Labor.Idaho.gov. More about the duties test is at Bit.ly/37iSYy0.
• • •
Sholeh Patrick is a columnist with the Hagadone News Network.