Deciding which employees are exempt from overtime regulations can be one of the more challenging questions companies face. Do a quick Google search for “wage violations’’ and you’ll find plenty of articles about businesses facing employee lawsuits or penalties.
Revised U.S. Department of Labor regulations expected to be released this summer may help make these employee classification decisions clearer. With the new regulations coming out, now is also a good time for employers to review their practices and make any necessary changes before they become costly mistakes.
Employers can be on the hook for up to two years of overtime – three if the Department of Labor finds the action was willful. In deciding a case, the department can consider any record the employee can produce, even if it’s a note handwritten on the spot.
Under current federal regulations, overtime pay is guaranteed only for employees working 40 hours a week and earning less than $23,660 a year, or $455 a week. But for higher paid employees, there are other considerations as well.
3 common overtime misconceptions
1. Salary is the sole factor
Many employers make the mistake of thinking an employee making more than $455 a week is automatically exempt from overtime pay. Not true. Other factors such as duties and number of employees supervised must be considered.
2. Highly skilled employees are exempt from overtime
While executive employees with the discretion to make determinations and run an organization are exempt from overtime, that’s not the case for those who only have special training or skills.
The classic example emerged when the Department of Labor determined that paraprofessionals, such as paralegals and paramedics, are eligible for overtime. Yes, they make important decisions, but only under the direct supervision of a lawyer or doctor, and following a protocol established for every situation they encounter.
3. Regulatory changes will require wage increases
Not so. Depending on the situation, employers can shift workers into exempt classifications and establish salaries equal to the total of hourly and overtime rates. Employees who fall on the cusp of any increase in the guaranteed-overtime pay level can have their base pay increased and be reclassified as exempt, again with an eye on total income paid in the past.
Plan ahead
When the proposed revisions are posted in the Federal Register, I believe that employers can do themselves a great service by reviewing the pending changes and submitting comments. The Department of Labor generally pays attention to comments and incorporates them into the final regulations.
In looking at your company’s own practices, you’ll want to contact an attorney with plenty of experience in this area. Properly classifying employees can be tricky; a guide with expertise in the matter can help you make corrections and avoid expensive penalties.
