Posted on: Wednesday, September 1, 2004

Overtime rules present challenge to employers

By Joyce M. Rosenberg
Associated Press

NEW YORK — Overtime has suddenly become a confusing proposition for some small-business owners.

New government rules that took effect Aug. 23 change the criteria under which employees must be paid overtime. That means company owners need to look at all of their employees and determine whether each should be receiving overtime — or might be exempt from overtime.

Generally, under the new rules, the majority of employees who earn less than $455 a week, or $23,660 a year, automatically qualify for overtime. Those who earn $100,000 generally do not have to be paid overtime.

For the many employees whose pay falls between those levels, owners will have to do an analysis of their jobs to determine whether they can be exempted from the rules. Basically, those whose jobs can be classified as executive, administrative, professional or in an outside sales capacity are exempted. So are some computer employees.

Those are the basics. Owners will need to look at the rules, and also need to look at the many exceptions, not just to job classifications, but also to salary requirements.

The Labor Department's Web site at www.dol.gov/esa/regs/compliance/whd/fairpay/main.htm has explanations of the rules, including a Power Point presentation with an overview, and what it calls "fact sheets" that go into more detail. The site contains definitions of what factors go into classifying an employee as executive, administrative, professional or an outside salesperson.

For example, the site describes an administrative job as follows:

"The employee's primary duty must be the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer's customers; and

"The employee's primary duty includes the exercise of discretion and independent judgment with respect to matters of significance."

It sounds straightforward, but human-resources professionals warn that doing an analysis of employees' jobs and salaries can be tricky.

"There are some gray areas — it's not so cut and dried," said Rob Wilson, president of Employco Group, a Chicago-based company that handles payroll and benefits for small businesses. "It's not as easy as, just look at salary."

For example, there are situations under which an employer makes deductions from a worker's pay, say, for lateness. That might at the end of the year have an impact on whether an employee should be making overtime. But, an employer must also have given workers notice of company policy on docking pay.

As you go through the analysis, you need to remember that it's not your perception of your workers' jobs and pay that counts here, it's the government's.