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7:44am EDT October 21, 2004
Employers may be setting themselves up for trouble by focusing too closely on the new federal regulations defining "white collar" overtime pay exemptions and forgetting about state law.

The federal Fair Labor Standards Act and its accompanying regulations establish a minimum threshold for determining who is entitled to overtime pay. If a state establishes requirements that are more employee-friendly, employers must meet those requirements.

A statistical breakdown of how the states approach overtime pay gives a hint to the problems awaiting employers, particularly if they operate in more than one state. Fifteen states have no overtime statute; six have statutes that do not apply to employers subject to the FLSA; and four have statutes covering only state employees. Six states plus the District of Columbia rely on FLSA definitions of overtime exemptions. The remaining 19 states, including Pennsylvania, have overtime tests that are different from the new federal tests.

The overtime exemption for certain computer professionals in Pennsylvania highlights the problem. Despite the FLSA and its new regulations, Pennsylvania employers must still follow the state rule: Employers must pay otherwise exempt computer professionals on a "salary basis" before they can claim the professional exemption from overtime pay for those employees. Here's why.

Pennsylvania long ago adopted the federal "long test" for determining the exemption for professional employees, including computer professionals. As a result, Pennsylvania employers historically enjoyed the luxury of using essentially the same definition, regardless of whether the question of eligibility for exemption arose under the FLSA or Pennsylvania law.

One aspect of the long test was whether the employee was paid on a salary basis, which requires (with limited exceptions) that the employee receive a guaranteed salary for any work week in which he or she performs any work, regardless of the number of days or hours worked or the quality of the work performed.

In 1990, Congress eliminated this requirement for certain computer professionals, as long as they were paid at least $27.63 per hour. But Pennsylvania never amended its own law to bring it up to date with this change.

As a result, computer professionals in Pennsylvania who are paid by the hour, regardless how high the hourly rate, are still eligible for overtime.

Businesses should consult with specialists in state and federal overtime rules to make sure that they are complying with these overlapping -- and sometimes contradictory -- requirements.

James G. Seaman is an attorney with the law firm Eckert Seamans Cherin & Mellott. Reach him at www.escm.com.