Overtime Rules

On August 23, 2004, the U.S. Department of Labor’s new overtime regulations took effect. The new rules change who is entitled to overtime pay, giving new overtime status to some employees and taking it away from others. In a further development, last week the U.S. House voted not to fund enforcement of the new rules, trying to limit their being put into effect.

Lower-paid salaried employees who previously did not get overtime receive good news under the new rules. If an employee does not make more than $455 per week ($23,660 per year), he will now be entitled to overtime pay even if he is salaried. The rules increased the earnings cutoff, which before was so low ($155 per week) that it included few full-time workers. The new rules also explicitly make eligible for overtime “blue collar” workers, including carpenters, electricians, mechanics, plumbers, iron workers, craftsmen, operating engineers, construction workers, laborers and non-management production-line employees.

In manufacturing, “team leaders” or “working supervisors” who perform mostly production work with some advising and supervising will be eligible for overtime, but teams leaders who supervise employees on a “major project” will not be. This distinction has raised concerns about interpretation.

There is bad news for computer programmers. In the past, the Labor Department categorized most computer programmers (those who were paid hourly and who did not supervise other employees) as nonexempt, making them eligible for overtime pay. The new rule provides that these employees, even if paid hourly, will be exempt, and thus not entitled to overtime pay.

Financial company workers and insurance adjusters are the types of employees more likely to fit within the expanded “administrative” exemption. Such a change would make them ineligible for overtime.

The new rules describe the various duties performed by police, fire fighters and other first responders so as to ensure that workers performing such duties are entitled to overtime. This is true even for police and fire fighters who job or rank also involves supervising others.

Remember that the flip side of getting overtime pay is having pay docked when the employee does not work. Many employers have worried about the consequences of “guessing wrong” in docking pay of an employee they believe is nonexempt, if the Department of Labor decides she is exempt. The new rules provide that the employer will not face an enforcement action if the employer has a policy prohibiting illegal deductions from employees’ pay, and then docks an employee’s pay for time not worked believing in good faith that she is a nonexempt employee, if the Department finds she is exempt and entitled to the docked pay, and the employer promptly reimburses the employee for the illegal deductions.

On September 9, 2004, 22 U.S. House Republicans voted with Democrats to deny funding to the Department to enforce the new rules, since they perceived that the new rules would amount to a net loss of persons eligible for overtime. The vote amended a large spending bill, which previously passed the U.S. Senate without the provision. A conference committee must try to reconcile the two versions of the spending bill. President Bush says he will veto the entire spending bill if it contains the denial of funding for enforcing the new rules. This standoff should be interesting to watch. In the meantime, the Department is enforcing the new rules.

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