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New Rule on Overtime Overdue
Whether an employee qualifies for overtime pay is one of the most hotly litigated and confusing issues covered by the U.S. Department of Labor’s Fair Labor and Standards Act.
The federal labor department, however, is taking steps to clarify the Depression-era law, particularly its section on whether someone is a salaried or nonsalaried worker — typically referred to as an exempt or non-exempt employee.
An exempt employee is one who is salaried and not eligible for overtime pay. A nonexempt employee is paid hourly and must receive overtime pay.
For most employers, knowing whether an employee is exempt or nonexempt is not an easy question to answer, said Deron Zeppelin, director of governmental affairs for the Society for Human Resource Management.
The definition of an exempt employee under FLSA has been the No. 1 question SHRM receives from its members, with over 8,000 calls on the issue last year alone, he said. The Alexandria, Va., organization is the largest association devoted to human resource management.
The ramifications of changing the regulations regarding exempt employees have the potential to be far-reaching for both employees and their employers, Zeppelin said.
“The regulations written right now, to this day, are from the 1940s and 1950s. They are impractical and inflexible to meet the modern workplace,” Zeppelin said.
For example, the 1949 regulations still refer to jobs from the 1930s that no longer exist, such as gang leader, linotype operator and straw boss, he said. The law has not kept pace with the changes the workplace and work force has undergone.
When the white-collar exemptions were put into the act, the work force consisted of mostly white, male workers, he said.
“There was a clear, clear line between managers and rank-and-file,” he said.
The white-collar exemption is severely outdated, he said. As the U.S. economy moved from a manufacturing to a service-oriented one, the distinction between managers and rank-and-file has become blurred.
The act established an exemption from overtime requirements for employees in certain professional, executive, and administrative jobs. Employers must apply a job duties test and a salary test to decide whether a worker is exempt, said Lawrence Peikes, a partner with the law firm of Wiggin & Dana.
