Hourly and Salaried Overtime

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New Overtime Rule Struck Down in Court

In Sept. 2017, U.S. District Judge Amos Mazzant struck down a new rule for overtime pay, saying the Labor Department set an excessively high salary threshold to determine which employees are exempt from overtime. The decision was widely anticipated after a preliminary injunction, in Nov. 2017, preventing the overtime rule from taking effect as scheduled on Dec. 1 while he weighed a final ruling. The rule, released in May 2016, would have nearly doubled the threshold at which executive, administrative and professional employees are exempt from overtime to $47,476 from $23,660.

 

Current Overtime Rules

Most employees must be paid at least minimum wage for all hours worked, and overtime pay at time and one-half the regular rate of pay for all hours worked over 40 hours in any work week. However, federal and Washington State law provide an exemption from overtime pay for so-called “white collar” employees employed in bona fide executive, administrative, and professional roles.

An employer that assumes it has hired a “salaried” or “exempt” employee may get a rude awakening when the employee takes action to collect unpaid overtime, and the employer discovers that the employee’s role doesn’t meet the requirements for a bona fide executive, administrative, or professional employee. The “salaried” and “exempt” employee requirements are summarized below. Please remember that these are only guidelines. Because overtime exemptions are determined on a case-by-case basis, it is important to review the details about your particular circumstances and compare them with current state and federal regulations.

Additionally, these regulations are subject to interpretation and change without notice. If you have specific questions, you should call the Washington L&I Employment Standards Section at 360.902.5316; call the U.S. Department of Labor at 866.487.9243; or consult with an attorney.

Under the federal Fair Labor Standards Act (FLSA), any employee employed in a bona fide executive, administrative, or professional position is considered exempt from the overtime provisions of the FLSA. The U.S. Department of Labor (DOL) has published extensive regulations defining which employees qualify for the exemption. Washington State has similar exemptions. Because the current federal exemptions for executive, administrative, and professional employees are more worker friendly than the Washington exemptions, only the federal exemptions are summarized below. (Where state and federal rules differ, employers must follow the rule that is most favorable to the worker.)

Which employees must be paid overtime premium pay for hours worked over 40 hours in any work week? Two types of employees must be paid overtime at time and one-half their regular rate of pay:

  • Employees paid on an hourly basis
  • Employees who are paid on a salary basis and not “exempt.”

Which salaried employees are exempt? A salaried employee is “exempt” if the employee is considered a bona fide executive, administrative, or professional employee. “Blue collar” workers who perform manual labor involving repetitive operations with their hands, physical skill, and energy (e.g., carpenters, electricians, mechanics, plumbers, iron workers, craftsmen, operating engineers, and construction workers) are not exempt, no matter how highly paid they might be.

  • Executiveemployees – An employee is an executive employee if: (1) the employee is paid on a salary basis of no less than $455 per week; (2) the employee’s primary duty consists of managing the enterprise (or a department or subdivision); (3) the employee regularly directs the work of two or more other full-time employees; and (4) the employee has the authority to hire or fire other employees, or the employee’s suggestions and recommendations as to hiring, firing, advancement, promotion, or any other change of status of other employees must be given particular weight.
  • Administrativeemployees – An employee is an administrative employee if: (1) the employee is paid on a salary basis of no less than $455 per week; (2) the employee’s primary duty consists of either the performance of office or non-manual work directly related to and the management or general business operations of the employer or the employer’s customers; and (3) the employee’s primary duty includes the exercise of discretion and independent judgment with respect to matters of
  • Professional employees– Both learned professionals and creative professionals are “exempt.” An employee is a “learned professional” if: (1) the employee is paid on a salary basis of no less than $455 per week; (2) the employee’s primary duty is the performance of work requiring advanced knowledge in a field of science or learning and customarily acquired by a prolonged course of specialized intellectual instruction; and (3) the employee’s primary duty includes work requiring the consistent exercise of discretion and An employee is a “creative professional” if: (1) the employee is paid on a salary basis of no less than $455 per week; and (2) the employee’s primary duty is the performance of work requiring invention, imagination, originality or talent in a recognized field of artistic or creative endeavor.

 

Reference:

For general information on state administrative policies, visit http://lni.wa.gov/WorkplaceRights/Rules/Policies/default.asp.

If you have any further questions about this topic or others, see the Department of Labor & Industries’ Help for Small Business page at http://www.lni.wa.gov/Main/SmallBusiness/.

 

Rev. 1/19/18

 


This article is an excerpt from the Handbook for Excellent Restaurant Operations (HERO), published by the Washington Hospitality Association.  Want a hard copy of the whole manual?  It’s one of the many benefits of becoming a member!  Find out more about joining the Washington Hospitality Association here.

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