Feds Are Cracking Down on Overtime Pay

Question: Sales are up and we're working more hours. But I'm totally flummoxed on the issue of overtime pay. I only have a few employees - some hourly, some salaried. Most are eager for extra hours and would waive the overtime premium. Who can help me figure this out?

Answer: We have two words for you: Watch out! First know this. According to the U.S. Department of Labor's Wage and Hour Division, employees must be paid overtime (at time-and-a-half) for working more than 40 hours in a workweek. Overtime pay may not be waived by any agreement between you and your workers.

A massive increase in Federal enforcement of wage and hour laws over the past two years has gone little noticed. In 2002 the Department of Labor (DOL) forced businesses to pay a record amount of back wages for violations (over $175 million). In 2003 they topped that by 21 percent, while the number of workers receiving back pay jumped 30 percent.

And the enforcement flurry is continuing. The Federal government might even issue a press release announcing that you've been nabbed, what you did wrong and how much you had to pay - as just happened to a half dozen restaurants in California to the tune of $277,000.

Particular scrutiny falls on thousands of what DOL considers "low-wage" businesses such as day care centers, restaurants, janitorial services, health care facilities, motels and temp services.

Confusion about overtime reigns. In general, Federal wage and hour rules apply to any business with at least two employees and $500,000 in revenues. But there are exceptions as well as State guidelines that may also come into play.

One common trap involves salaries for workweeks over 40 hours. According to DOL, a fixed salary for a regular workweek longer than 40 hours does not eliminate an employer's obligation to pay overtime.

Under Federal rules, however, employers can exempt certain positions from overtime regulations. These "white collar" exemptions include executives and professionals who spend at least 80 percent of their time on duties involving their own independent discretion and not structured work.

As officials at Paxchex, a payroll firm, note, "Classifying your employees as either exempt or non-exempt is neither exact or easy." The decision shouldn't be based merely on job title or whether someone is hourly or salaried. Instead, use job duties as the main factor.

Also note that Federal law does not require extra pay for weekend or night work. Nor is there any provision for double-time pay. Both are matters of agreement between you and your employees.

Here are some resources that can help you clear up the confusion over wage and hour rules:

• WHD is an acronym every small business with employees should know. It stands for the U.S. Department of Labor's "Wage and Hour Division" - the special unit that enforces minimum wage, child labor and overtime pay rules. The WHD Web site has detailed info on Federal requirements for overtime, minimum wages, family and medical leave and related topics critical to small business. Look for the "Overtime Pay" section in the left-hand column. There's also a helpful FAQ section that answers questions about when overtime is due, how many hours per day or week employees can work, and what's considered full- or part-time employment. State requirements and contacts are also listed. Click on "State Labor Laws" in the column at right. Visit the site at www.wagehour.dol.gov or call the toll-free help line at (866) 487-9243. You can also ask a question online by clicking the "Contact Us" button.
  
  
• FindLaw for Business can help you locate specialized legal help in your area for labor law questions. Visit www.findlaw.com and look under "Employers' Rights" in the "For Business" section.
  
  
• Paychex, a small business payroll services provider, offers several booklets that you can download free in the "Library" section of its Web site. The one called Exempt vs. Non-Exempt has a helpful explanation of Federal overtime pay rules and how to classify employees as exempt or non-exempt. Find the booklet at www.paychex.com/library.