NEW OVERTIME RULES ANNOUNCED BY DEPARTMENT OF LABOR

May 2004

On April 20, 2004, the Department of Labor (DOL) announced new overtime rules which will take effect in 120 days.  These new regulations cover a host of overtime issues.  However, the main changes are as follows:

• The “long” and “short” tests no longer exist in determining exempt and non-exempt status; the test have been simplified and clarified.

• Salary basis test changed:  minimum salary requirement for exempt employees raised to $23,660 annually, or about $455 a week;

• Highly compensated employees who earn at least $100,000 per year and have minimal exempt duties or responsibilities are exempt from overtime;

• Full day suspensions of exempt employees for disciplinary reasons is permitted without threatening exempt status;

• Improper salary deduction from exempt employees’ pay will no longer result in loss of exemption absent pattern or practice of such deduction; provides a “safe harbor” making it easier for employers to fix improper pay deductions;

• Educational requirements for employees to be classified as exempt professionals have been clarified; and 

•  Rules for computer and outside sales employees to be classified as exempt have been clarified.

The new regulations also include rules guaranteeing overtime pay for police, firefighters and paramedics, and rules permitting project leaders, financial-services workers and funeral directors to be classified as exempt under certain circumstances. 

Given the number of changes in these overtime rules, it is recommended that employers conduct an audit of its present workforce to determine whether any of its employees need to reclassified.  The DOL has fact sheets and on-line training seminars on these new regulations available on its website: www.dol.gov/esa.