Some may be unaware of new overtime rules

By Yvette Armendariz
Arizona Republic

For small companies, the recently revised white-collar overtime rules may be a shock. Many don't have human-resource departments or legal teams to wrangle through 154 pages of job definitions.

The Department of Labor, reacting to increased lawsuits related to the Fair Labor Standards Act, revised the minimum salary and redefined duties required of employees to be exempt from overtime. The final rules were published in the Federal Register on April 23.

One key change is that employees earning less than $455 a week, or $23,660 a year, must receive overtime. Before, employees could earn as little as $155 a week and still not get overtime.

An estimated 1.3 million low-wage white-collar workers are expected to benefit, while an estimated 107,000 high-income workers could lose out on overtime, according to the Department of Labor.

Mary Anderson, human-resource manager at the Phoenix Art Museum, is among those taking a proactive look at their staffs, even as Congress tries to squash the ruling.

"I found it's a wonderful time to assess your situation," she said.

For the museum, the exercise helped ensure that its 110 employees are classified correctly. About 35 percent are considered exempt of overtime, based on their duties and salary levels. The new rules don't change any of those classifications.

Norma McCormick, president of Guaranteed Clean Carpet Systems in Gilbert, Ariz., isn't expecting to make changes to the status of her two working managers, whom she pays overtime to build loyalty.

"I'm already asking them to work nights and weekends," she said. "I pay overtime because I think it's right."

But many smaller companies may not be reacting to the changes because they aren't aware that change is coming.

"Therein lies part of the problem for small businesses. They don't have the resources because they are working on their business," said Virginia McMinn, president of McMinn and Associates Ltd., a human-resources consulting company. "They think ignorance of the law is an excuse, but it's not an excuse."

And ignorance can come at a huge cost.

Labor law attorney Laurent Badoux, with Littler Mendelson's office in Phoenix, says that damages will go back three years for companies that never made an effort to comply, vs. two years for those that did but did it incorrectly.

Employers nationally were assessed a total $182.1 million in back pay in fiscal 2003, up 27.4 percent from the previous year. And civil penalties cost employers $3.2 million.

But even with Congress trying to change the new ruling, companies need to be evaluating how staffs could be affected by the rules to at least estimate what kind of cost changes could have on their bottom line, said Lori Higuera, an attorney with the Phoenix firm Fennemore Craig.

Compliance starts with a simple job description, said Judith Flint of JRF Human Resource Solutions in Phoenix. The job description sets the standards for reviews and define the duties key to determining pay, she said.

"You have to know what employees do because it's what they do that determines if they are exempt and nonexempt, not their title," Flint said.