Managing Your Business: Get Ready for New Overtime Rules Ready or not – new federal rules governing overtime pay take effect August 23. The first comprehensive overhaul of the rules in 50 years has survived congressional challenges and labor union protests, although the new rules may be challenged in court and congressional opponents may try again to block them after the August recess. Here are the highlights: *Almost all employees making $100,000 a year or more, including bonuses and commission, are designated as “highly compensated” and are exempt from overtime pay. *Those earning less than $23,660 a year, or $455 a week, must be paid overtime, regardless of their job title. *For those in between, eligibility for overtime pay depends on their job classification and duties. They may be exempt if they meet certain tests to be classified as administrative, executive or professional employees. The AFL-CIO, which has led the fight against the rules, says, “In general, the final overtime regulation will have an especially large impact on workers with minimal supervisory or ‘leadership’ responsibilities, workers who perform minimal amounts of administrative work, workers with special skills, and certain kinds of employees in the computer field.” The Labor Department’s final regulation, issued April 23, says an employee may be exempt from overtime if he or she “leads a team of other employees assigned to complete a major project,” supervising two or more people. Some critics say companies could re-classify people as “team leaders” to avoid paying overtime. A June survey of employers by the consulting firm Hewitt Associates found that most companies believe IT workers present the thorniest classification problems. Many said shift supervisors and production supervisors are also in a gray area. “Many companies have a considerable road in front of them, as they need to sort through existing job titles and codes before they can determine what needs to be done with the new [Fair Labor Standards Act] regulations,” said Tom Farmer, senior consultant for Hewitt. “Organizations have to ensure that they properly classify positions by employees, examine variations in job duties by department and clarify overly generic job titles.” “Job titles do not determine exempt status,” the Labor Department said in a fact sheet. People qualifying as “learned professionals” will also be exempt. The regulation states, “’Work requiring advanced knowledge’ means work which is predominantly intellectual in character, and which includes work requiring the consistent exercise of discretion and judgment.” As examples, it mentions fields such as law, medicine, theology, accounting, actuarial computation, engineering, architecture, teaching, various types of physical, chemical and biological sciences and pharmacy. The Labor Department originally proposed recognizing training in the military, a technical school or a community college as qualifications for the professional exemption, but that was dropped from the final rule. The rule requires that overtime must be paid to “manual laborers or other ‘blue collar’ workers who perform work involving repetitive operations with their hands, physical skill and energy.” The federal rule will not pre-empt state or local laws that make it more difficult to exempt employees from overtime. It does not supersede overtime provisions in union contracts. An analysis by the Economic Policy Institute in Washington estimated that more than 6 million people could lose eligibility for overtime pay under the new rules; the Labor Department disputes that. However, most of the large companies surveyed by Hewitt Associates said they would not take away any employee’s eligibility. A detailed explanation of the rules and interactive training are available at www.labor.gov/fairpay.