Fast Lane
Over the limit
Are you paying overtime to the right people?
By Todd Shryock
Smart Business Cleveland | December 2001
In the old days, there was a clear distinction between management and labor.
A small number of managers dealt with a larger number of workers who worked on the shop floor or assembly line. But as the economy has moved more people behind desks, the line between who is eligible for overtime pay and who isn't has blurred.
"The Fair Labor Standards Act is very simple in its rules, but deceptively complex in its application," says Jonathan Segal, a partner in the Wolf Block Schorr & Solis-Cohen employment services group. "What the law generally says is that you are eligible for overtime unless you are exempt. You are exempt only if your are paid on a salaried basis and perform exempt responsibilities."
Exempt duties include executive responsibilities, professional responsibilities such as those of a physician and administrative responsibilities.
"The principles of the law make sense, but the framework doesn't fit the information economy," says Segal.
This means there are a lot of gray areas surrounding who's exempt and who isn't.
* To prove executive duties, an employer must show the employee supervises two full-time employees and that supervision constitutes at least 50 percent of his or her time. "If supervising is only 10 percent of what they do, that won't make it," says Segal.
* For a professional exemption, you just need to show some sort of degree upon which the job rests. This could be a doctor, nurse or psychologist, for example. This exemption is relatively narrow.
* Administrative exemptions are where most employers get into trouble. "It's fraught with ambiguity," says Segal. "To meet the exemption, the person must generally have substantial judgment and independent discretion and the ability to bind the organization. They should have the ability to develop and implement standards."
A computer programmer with extensive skills who works within an existing program may qualify for overtime pay. A programmer who has a more limited skill set but creates programs for the company to use may be exempt.
An executive secretary could be exempt if he or she has a lot of authority.
"If you want a position to be exempt, then you better give it real judgment and discretion," says Segal. "You need to show examples within the organization how they established and enforced protocol."
A title is relevant but isn't the determining factor. A custodial worker may be called a plant sanitation manager, but it doesn't change the job that's done.
Employers must also never give the impression that an exempt employee is anything but salaried, which carries special rules. Salaried workers cannot be docked pay for anything less than a full work week. If it's for sick or personal time, the minimum deduction is a day.
If you give exempt employees money for working extra hours, don't pay based on an hourly basis.
"Give them a flat amount so it looks like extra compensation," says Segal.
