Exempt Overtime Policy?

crawfod · June 2004

Our overtime policy has a brief sentence dealing with Exempt employees that says, "Personnel who are compensated by salary and determined to be exempt from the Fair Labor Standards Act are not entitled to payment of overtime." I have been reading articles that imply employers are going to have to spend time rewriting their policies to deal with the new FLSA changes. Do any of you have more detailed policies that address rules pertaining to Exempt employees?

A second related issue is the new regulations are now calling the current "window of correction" the "safe harbor rule". It also suggests "having a clearly communicated policy that prohibits improper pay deductions; having a complaint mechanism;..." If an employer does the above it will retain the exemption even if it has made impermissible deductions. Do any of you have such a policy?

My email address is [email]dave.crawford@gallatin-tn.gov[/email] if you have anything to send. Thanks.

Shadowfax · June 2004

I don't understand how an employer's policies will affect the exempt/non issue. Your current policyy language, would, as far as I have seen in the new regs still be ok.

santire · June 2004

The new overtime regulations make some interesting points on both the questions you ask. Yes, as I point out in the second half of this reply, all employers need to consider rewriting their policies in view of the new regs. As to overtime for exempt employees, the world has not changed. Exempt employees are not entitled to overtime under the new regs any more than under the old ones. However, the new regs specifically say that an employer can, if the employer chooses to do so, pay additional compensation. I quote the new regs here: "based on hours worked beyond the normal workweek. Such additional compensation may be paid on any basis (e.g., flat sum, bonus payment, straight-time hourly amount, time and one-half or any other basis), and may include paid time off." Actually, even under the old regs an employer could pay overtime to exempt employees. Though the DOL had always allowed this, the courts stopped it as being the treatment of exempt as nonexempt. The DOL and the courts read the law differently. However, even the courts had come around recently to allow it. Now the regs make clear that it can be done. This does not mean, and has never meant, that an exempt employee can be docked for failing to work a full 40 hour week. As to paying an exempt overtime, this apparently can be in excess of any numeber of hours as the employer may determine such as 30, 40, 50 or whatever. Bear in mind the new $455 weekly floor needed for most exemptions. As to the question about policy language, the new regs have added what lawyers call a "safe harbor" provision. A "safe harbor" is a precaution whereby if it is taken safety can be achieved just like a harbor available for a ship in a storm. In other words, if you communicate to your employees - this means it should be in writing - a policy that prohibits improper pay deductions and includes a complaint mechanism and the employer reimburses an employee for improper diductions and makes a good faith effort to comply with the regs, the employer will not jeopardize the employee's exemption status. Even if such a policy is in place, the exemption can be lost for a wilful violation by the employer. The bottom line, though, is that every employer would be wise in putting such a "safe harbor" provision in the employee policy manual and/or on the company Intranet.
Stanley P. Santire, J.D.

Exempt Overtime Policy?

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