New rules known as “FairPay”

Effective August 23, 2004 new rules known as “FairPay” have been enacted by the United States Department of Labor. These rules relate to the requirement to pay overtime. This is intended to provide a summary of the new rules.

Employers are required to pay over time (at time and ½) for all hours worked by an employee in excess of 40 hours in a work week unless the employee is exempt. Any employee earning less than $455 per week is not exempt by definition.

Certain types of employees are exempt from the overtime requirement. In order to be exempt these employees must be paid on a salary basis. This means that the employee must be paid a predetermined amount each pay period. The predetermined amount cannot be reduced because of variations in the quality or quantity of the employees work. Deductions from an employees salary are permissible when an exempt employee is absent from work for one or more full days for personal reasons other than sickness or disability. Deductions from pay for absences due to sickness or disability are allowed if made in accordance with a bona fide plan, policy or practice of providing compensation to salaried employees. Employers are not required to pay the full salary in the initial or terminal week of employment. However, New Hampshire statues provide that prorating salary to a daily basis is allowed only if an employee terminates voluntarily before the end of the pay period.

Exempt employees include;

Executives defined as employees with a primary duty of managing an enterprise or department or subdivision of an enterprise who regularly directs the work of at least two full-time employees or their equivalent. The executive must have the authority to hire and fire employees or the executives’ recommendation as to hiring, firing, advancement, or other change in status must be given particular weight.

Administrative Employees defined as employees with primary duties of office or non-manual work directly related to the management or general business operations of the employer…and the primary duty includes the exercise of discretion and independent judgment with respect to matters of significance.

Professional Employees defined as an employee whose primary duty must be performing work requiring advanced knowledge (work that is predominantly intellectual in character), work which requires the consistent exercise of discretion and judgment. Also, the advanced knowledge must be in a field of science or learning and must be customarily acquired by a prolonged course of specialized intellectual instruction. The test for the “creative professional” exemption requires that the employee’s primary duty must be performing work requiring invention, imagination, originality or talent in a recognized field of artistic or creative endeavor.

The following types of employees are not affected by the rules changes and continue to be exempt from overtime rules:

Outside sales persons who regularly spend work time away from the employer’s place of business.

Computer Specialist (system analysts, system designers, computer programmers, software developers, and software engineers) who are paid on a salary basis of not less than $455 a week, or paid an hourly rate of at least $27.63.

Automatically eligible for overtime. The following kinds of employees are automatically eligible for overtime pay, regardless of rank or pay level: Blue collar workers, police, firefighters, paramedics, emergency medical technicians, and many other types of “first responders” and public safety employees, and licensed practical nurses.

For more information on this topic: Detailed explanations of the new overtime exemption rules are available at the DOL web site. www.dol.gov/esa/regs/compliance/whd/fairpay/main.htm