‘Employers have option to exempt or pay overtime’
The newly adopted federal regulations on overtime pay give employers the option to either pay workers $455 a week or keep them at their present salary level but entitle them to receive overtime pay beyond their worktime.
“It’s up to the employer. The employers have the prerogative to either raise the rate to meet the exemption [$455 a week] or they can choose an hourly rate that equals to what the employees are making now and pay them for overtime,” said U.S. Department of Labor wage and hour division investigator Richard L. Hamilton during yesterday’s forum sponsored by Society for Human Resources Management at Hyatt Regency Hotel Saipan.
He said that an hourly or weekly rate is determined by multiplying the current monthly pay by 12 months and dividing it by 52 weeks. This covers 40 hours of work time a week.
Anything that exceeds 40 hours must be compensated and is treated as overtime, which is “a rate not less than one and a half times the regular rate.”
Any contract that would provide for more than 40 hours without overtime pay is a violation of the rules, he said.
To avoid paying for overtime, the employer can also change or revise the employee’s job description, “which may not be easy,” said private lawyer Marcia K. Schultz of Carlsmith Ball LLP in her presentation during the forum.
Schultz, who reportedly reviewed the voluminous new regulations page by page and looked at how it would impact the CNMI, said the Federal Labor Standards Act regulations in general, provide minimum requirements that can be exceeded, but cannot be reduced or waived.
Employers, she said, can also voluntarily provide higher benefits than the statutory minimum by providing a higher overtime premium, for example, double time, or a shorter workweek (pay OT on a daily basis).
The new rules, she said, raised the minimum salary level to $455 per week from the current $155 a week for executive and administrative and $170 a week or more for professional.
She said the minimum rate does not include any privileges such as housing, transportation, and the like.
“This is separate from board, lodging, or other benefits such as meals,” she said.
The U.S. DOL said that, while the rules for exemptions are different for each broad occupation group—executive, administrative, professional, and outside sales worker jobs—the overtime exemption generally depends upon the duties and responsibilities of the job and salary, not the job title.
“The job title does not matter if the job duties do not meet the requirements of the regulations. Workers must be paid on a guaranteed salary basis to be exempt,” the DOL said.
To qualify for the executive employee exemption, the employee must be compensated no less than $455 per week; the primary duty must be managing the enterprise, or managing a customarily recognized department or subdivisions of the enterprise; must customarily and regularly direct the work of at least two full-time employees, and must have the authority to hire or fire staff.
An administrative employee shall be exempt from overtime pay if the employee is compensated not less than $455 a week; 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.
To qualify for overtime exemption, learned professionals must be compensated on a salary or fee basis no less than $455 a week; primary duty must be the performance of work “requiring advanced knowledge, defined as work which is predominantly intellectual in character and which includes work requiring the consistent exercise of discretion and judgment; the advanced knowledge must be in a field of science or learning; and the advanced knowledge must be customarily acquired by a prolonged course of specialized intellectual instruction.”
Under the regulations, “work requiring advanced knowledge” means work that is predominantly intellectual in character. A professional employee generally uses the advanced knowledge to analyze, interpret, or make deductions from varying facts or circumstances.
Fields of science or learning include law, medicine, theology, accounting, actuarial computation, engineering, architecture, teaching, various types of physical, chemical, and biological sciences, pharmacy, and “other occupations that have a recognized professional status and are distinguishable from the mechanical arts or skilled trades where knowledge could be of a fairly advanced type, but is not in a field of science or learning.”
The learned professional exemption is restricted to professions where specialized academic training is a standard prerequisite for entrance into the profession.
The best evidence of the requirement, the department said, is having appropriate academic degree, but it said that the word “customarily” means the exemption may be available to employees in such professions who have substantially the same knowledge level and perform substantially the same work as the degreed employees.
These form part of the new rules the U.S. DOL had issued under the part 541 regulation of the Fair Labor Standards Act, requiring the payment of overtime pay to the exempt group of employees who receive $23,660 a year and below.
Currently, employees earning $8,060 annually or less are guaranteed overtime pay.
The new policy will take effect on Aug. 23, 2004.
The new rules, known as the FairPay Initiative, amended the 50-year old part 541 regulations of the FLSA, which was originally passed in 1938. The last major revision to the regulations was in 1954.
The new regulations contain a special rule for “highly compensated” workers who are paid total annual compensation of $100,000 or more.
The FairPay rules also clearly state that blue-collar workers, and emergency people—police officers, fire fighters, paramedics, emergency medical technicians, and licensed practical nurses—are entitled to overtime protection.
