Link This | Email this | Blog This | Comments (2)

Jerry Cohen

Overtime: What You Need To Know (Part I)

1.         Introduction: The “clash of civilizations” is a hot and timely topic of debate. Dear readers, we’re not concerned with global politics here, we’re talking about the fierce wars being waged between the plaintiffs bar and the business community regarding employee overtime. The fighting is ferocious and the stakes are high. For example, lawsuits claiming that employers have failed to pay mandated overtime have more than doubled from 2001 to 2006, and employers are now paying over $1 Billion a year to settle such claims, the Wall Street Journal reports. We’ll review the overtime minefield and discuss ways to ensure that employers stay out of the melee and out of court, and employees are treated fairly.

2.         The Law:        Generally, if an employee earns less than $455 per week (or $23,660 annually), the employee qualifies for overtime pay at a rate of one and one-half times the employee’s regular rate of pay after 40 hours of work in a workweek. For other employees, the Fair Labor Standards Act (FLSA) requires overtime to be paid unless the employee falls within certain express exemptions. Several of the more pertinent exemptions are as follows (the terms in quotation marks may not mean what you think they mean; consult the FLSA or an attorney):

(a)                Executive: (i) the employee’s “primary duty” is “management;” and (ii) he or she “customarily and regularly” directs the work of at least two full time employees; and (iii) the employee has the authority to hire or fire other employees or his or her suggestions as to such matters and with respect hiring, firing, promotions and other changes of status are given “particular weight.”

(b)               Administrative: (i) the employee’s “primary duty” is performing non-manual or office work “directly related to the management or general business operations” and (ii) includes the exercise of “discretion and independent judgment” with respect to “matters of significance.” 

(c)                Outside Sales: (i) the employee’s “primary duty” is making “sales” or “obtaining orders” and (ii) the employee “customarily and regularly” is engaged “away from the employer’s place of business.”

(d)               Commissioned Salespeople: if a company qualifies under the FLSA as a “retail establishment,” a salesperson is exempt if (i) the employee’s regular rate of pay exceeds 1.5 times the applicable minimum wage, and (ii) more than half of the employee’s total earnings consist of “commissions” (as narrowly interpreted by the FLSA).

To determine whether the exemptions described in the first three bullet points above are applicable, a thorough analysis of the employee’s duties must be performed. For example, the FLSA clarified that such exemptions apply only to “white collar” employees and that most “blue-collar” workers that perform manual labor involving repetitive operations with their hands, physical skill and energy are non-exempt and must be paid overtime.

3.         Typical Exempt Or Non-Exempt Employees: Depending on the actual duties of the employee and other factors, the following job titles may be exempt or non-exempt from overtime: 

(a)                Exempt: store manager; assistant manager (be especially watchful for whether “assistant managers” comply with all of the requirements of the executive exemption); warehouse manager; operations manager; senior merchandiser; sales manager; commissioned sales person.   

(b)               Non-Exempt: warehouse; customer service; delivery; interior design; office clerk; finisher; display coordinator; maintenance; housekeeping; grounds keeping; logistics.

Part 2 of this post will discuss common missteps and myths regarding overtime (no, salaried employees are not automatically exempt from overtime). If you have any experience you would like to share with our readers, please post a note below or email me at jcohen@homefurnishingslaw.com.