Overtime Laws Change: The Real Impact On Your Business

Prepared by:

Stovash, Case & Tingley, P.A.
SunTrust Center
200 South Orange Avenue
Suite 1220
Orlando, FL 32801-3410
Phone: 407-316-0393
Fax: 407-316-8969

It is difficult to separate myth from reality as we look at the first major overhaul of the overtime laws in several decades. On August 23, 2004, the wage and hour regulations were updated in an attempt to simplify the requirements. The Fair Labor Standards Act (FLSA) governs wage payment and requires employers to ensure employees: (1) receive overtime for hours worked over 40 in a workweek; (2) are paid at least minimum wage ($5.15) per hour; and (3) maintain accurate time records unless otherwise exempt.

These exemptions are at the heart of the revisions, as well as some of the dissension surrounding implementation. Some labor leaders claim that these changes will result in millions of employees losing their right to overtime. At the same time, business leaders are concerned that the revisions will simply lead to more litigation in what is fast becoming fertile ground for employment related litigation. While the goal of the revisions is to simplify the guidelines, it is likely these new regulations will do little to stem the tide of increased exposure for employers.

While it is difficult to forecast the end result of these changes, we can provide the following recommendations to employers based on these new guidelines:

1. Major Revisions: There are two substantial changes that may impact your business:
   1. Change to Minimum Salary Level for Exempt Employees: Under the previous guidelines, employees earning as little as $155 per week could qualify for an exemption from overtime if their job duties met certain criteria. Under the new guidelines, the weekly salary level increases to $455 per week for all of the available white-collar exemptions. An employer has the option of increasing the rate of pay for these exempt employees to at least $455 per week or paying overtime to these employees.
   2. Some Employees Receiving Overtime May Now be Exempt: Under the previous regulations and enforcement policies, the courts and Department of Labor took a close look at the percentage of time an employee spent in particular duties. Under the new guidelines, there will be a specific emphasis on the primary duty and overall responsibilities of a position. Additionally, the regulations specifically identify certain positions that may now be exempt in various industries.
2. Recommendations:
   1. In 2003, the Department of Labor's Wage and Hour Division collected $212 million in back pay under the FLSA. At the same time, private lawsuits in this arena have escalated at a rate which requires management to take a close look at FLSA compliance.
   2. Stovash, Case & Tingley, P.A. recommends that employers:
      1. conduct a review of compliance under the FLSA;
      2. determine if changes to pay plans or classifications are appropriate; and
      3. implement any changes keeping in mind possible liability and the employee relations impact of any changes.
   3. Our firm also offers a comprehensive Employment Law Compliance Review that provides practical advice to help meet FLSA and other challenges.