On April 20, 2004, U.S. Secretary of Labor Elaine L. Chao announced the final regulations governing overtime eligibility for white-collar workers under the Fair Labor Standards Act. The department’s new FairPay rule will take effect in late August.
According to the Labor Department, FairPay will strengthen overtime rights for 6.7 million American workers, including 1.3 million low-wage workers who were denied overtime under the old rules. As a result, these workers will gain up to $375 million in additional earnings every year. By clarifying who is eligible for overtime protection, the new rules will also reduce litigation.
"The problem that employers have had is that the old overtime rules were vague, outdated and confusing," said Katherine Luger, vice president for legislative and political affairs for the National Retail Federation, in the Federation’s recent news release. "The lack of clarity has made it difficult to know you are making the correct decision about who gets overtime and who does not. That created a gold mine for trial lawyers trolling for clients they could convince to sue their bosses. This update should give us the clarity to know for certain who should get overtime and put an end to that explosion of lawsuits."
Under the old regulations, only workers earning less than $8,060 annually were guaranteed overtime. The new rules expand the number of workers eligible for overtime protection by nearly tripling the salary threshold. Under the FairPay regulations, workers earning less than $23,600 a year, or $455 a week, are guaranteed overtime beyond a 40-hour work week.
When overtime rules were proposed a year ago, Labor Department officials estimated that an additional 644,000 workers would be ineligible for overtime pay. According to the new rules, the Labor Department estimates that only 107,000 would be denied eligibility.
Under the Fair Labor Standards Act, workers are generally to receive time-and-a-half pay when they work more than 40 hours a week, except when they are salaried workers in certain executive, administrative or professional positions. The new rules modify the tests used to determine who qualifies for overtime, with the criteria including the amount of managerial responsibility and professional training.
Under the new regulations, employees earning at least $100,000 a year will not qualify for overtime, a threshold that was increased from $65,000 under the Labor Department’s original proposal last year. The type of job also affects overtime protection. According to an article in the Washington Post, Chao said the new rules who continue to provide overtime eligibility to blue-collar workers, and exemptions will not apply to manual laborers who "perform work involving repetitive operations with their hands, physical skill and energy." Laborers are entitled to minimum wage and overtime protection under the Fair Labor Standards Act and are not exempt under FairPay rules, no matter how high they are paid.
"The final rule accomplishes exactly what we intended from the start, which is to preserve and protect overtime rights for white-collar workers," said Chao in a recent article from the Washington Post. "We are pleased to see people recognize the significant gains to workers under our final rule. Now there can be no doubt that workers win."
The new FairPay regulations will be published in the Federal Register and a text version is available at www.dol.gov/fairpay . For more information about the Fair Labor Standards Act, visit www.dol.gov .