Welcome to Spotlight
Welcome to the premiere issue of G&A Partners’ Spotlight, the newest tool from G&A to help you manage your business. Each issue of Spotlight will focus on a single topic in the area of human resources, benefits, employee compensation or risk management. Spotlight’s articles will be timely, relevant and concise so you can stay up-to-date on the latest human resource management trends without sacrificing what you need most... time to grow.
A Turn of “FairPay”
On August 23, 2004, the Department of Labor’s (DOL) new Fair Labor Standards Act (FLSA), or “FairPay,” goes into effect. Designed to strengthen overtime protections for workers, the new rules will require employers to now pay overtime to employees who earn $23,660 annually, or $455 per week. This is nearly three times the current salary exemption threshold.
Some in Washington, however, believe the new rules fail to protect workers’ overtime rights. In a recent statement, Senator Tom Harkin (D-Iowa) called the new overtime regulations “an assault on American workers,” and claimed that in every instance where the DOL made a change to the existing rules, the criteria for overtime exemptions was weakened.
How an employer views the new FairPay rules will likely hinge on whether the company will have to pay its workers more or less overtime under the new plan. With a multitude of changes to consider though, the net effect to the bottom line will not be immediately obvious.
Nevertheless, after August 23 business owners will have only 120 days to bring their companies into compliance with the new rules or run the risk of a costly employee class action lawsuit or a DOL audit. To avoid such risks, companies will need to promptly conduct an audit to reassess its employees’ exempt or non-exempt classifications and adjust their overtime pay practices accordingly.
A sample of the new FairPay rules’ exempt and non-exempt classifications is listed below. As with most rules though, there are certain caveats and exceptions and employers should be aware of them. For further details about the new FairPay rules, visit www.dol.gov.
Highly-compensated employees who earn $100,000 or more annually and who typically perform one or more of the responsibilities of an executive, administrative, or professional employee are exempt from overtime requirements, or in other words, ineligible for overtime pay. This group had previously become ineligible for overtime pay after earning $65,000 annually.
“Blue Collar” workers are considered manual laborers who perform work involving repetitive operations with their hands, physical skill, and energy. Such non-management employees in production, maintenance, construction, and similar occupations are eligible for overtime pay regardless of how highly they are paid.
Learned professionals are those whose work requires “advanced knowledge” or is predominantly “intellectual” in nature. These professionals are not eligible for overtime pay.
Business owners who own at least 20 percent equity interest in their company and are actively involved in the management of their company are not eligible for overtime pay.
John Allen of G&A Partners, a Houston-based Professional Employer Organization says employers cannot afford to be complacent when it comes to the new changes. “We expect many small to mid-size businesses to see an increase in the number of workers who qualify for overtime pay under the new FairPay rules. Ignoring the changes could be a costly mistake that would result in expensive court judgments or DOL fines against a company.”
In its effort to enforce FLSA rules, the DOL has historically targeted its investigations toward low-wage industries with vulnerable (and often immigrant) workforces and chronic violations. In fact, nearly one-third of the DOL’s enforcement resources are attributed to investigations in nine low-wage industries, including daycare, restaurants, janitorial services, agriculture, temporary services and healthcare.
It is never too early to begin conducting an internal audit to assess your workers’ salaries, as well as their roles and responsibilities, to appropriately classify them as exempt or non-exempt. For assistance in preparing your company for FairPay or for more information about the new FairPay rules, contact Ori Murdock, SPHR at G&A Partners. You can call Ori at 713-784-1181 (x.230) or send her an email at omurdock@gnapartners.com.
