Article from HRCentral News

After much anticipation, on April 20^th, the United States Department of Labor (DOL) at long last issued its updated overtime exemption regulations. They will go into effect August 23, 2004 and mark the first wholesale update of the regulations since 1975. The only other significant change that has occurred in the interim was the addition of the computer professional exemption in 1996.

The new regulations are significantly different from the proposed regulations DOL issued in March of last year which generated a lot of uproar from labor groups who argued that as many as eight million employees would lose their eligibility for overtime. Ultimately, after reviewing more than 75,000 public comments on the proposed regulations, the final version ended up fairly similar to the current regulations except for three key changes: the salary requirement was increased, an exemption was added for white-collar employees who make more than $100,000 per year and the long and short duties tests each exemption currently has were eliminated in favor of one “standard” test. DOL estimates that the changes will result in approximately 1.3 million low wage employees becoming eligible for overtime. That is mostly due to the increase in the salary requirement. On the flip side, they estimate that 107,000 employees will lose their overtime eligibility mostly as a result of the new highly compensated employee exemption.

Summary of Changes

Salary Requirement
Under the new regulations, to be exempt from overtime, an employee will have to be paid a salary of at least $455 per week, which works out to $23,660 per year. That is nearly double the current level of $250 per week for the short duties test. Unchanged since 1975, it had reached a point where the current salary requirement was only slightly higher than the federal minimum wage rate of $206 per week for a full-time employee. It means that employers will either have to give some employees significant pay increases or change their status to nonexempt because even if a position’s job duties meet the duties test, if it does not meet the salary requirement, it will not be an exempt position.

Duties Tests
The new “standard” duties tests are not significantly different from the current duties tests. The reason is, aside from the elimination of two tests for each exemption in favor of one for each, most other changes merely incorporate case law updates or information from DOL’s interpretive guidelines that were not previously part of the regulations.

One example is the administrative exemption. Employers have long considered the current test vague and difficult to apply. One of the most confusing elements is the requirement that an employee exercise “discretion and independent judgment.” Employers are often unclear how much discretion and judgment an employee has to apply and to what types of activities to be exempt. To clarify this, the new regulations state that independent judgment and discretion must be exercised in “matters of significance,” and provide several examples of activities that would qualify which should make it somewhat easier to apply the standard. Similar changes were made to the other tests as well, all for the purpose of making them easier to understand and apply. Because the changes do more to clarify the rules as opposed to change them, it does not appear a significant number of employees will lose their overtime eligibility.

Highly Compensated Employee Test
This new exemption applies to highly-paid white collar employees. There are three elements to the test. The employee must:
1. Be paid a salary of at least $455 per week and total compensation of at least $100,000 per year;
2. Have a primary duty of performing office or non-manual work; and
3. Customarily and regularly perform any one or more of the exempt duties or responsibilities of an executive, administrative or professional employee.

Due to the minimum salary requirement, commission-only employees will not qualify. That does not mean all compensation has to come from salary. It can also include other monetary sources such as bonuses and commissions. However, it cannot include payments for board, lodging, health insurance, life insurance, employer contributions to a retirement plan or other benefits.

Interaction with State Laws

Most states have overtime regulations that are similar to, if not identical to the current federal regulations. When the new federal regulations take effect, if a state does not update its regulations to match the federal ones, an employer will have to use the test that provides greater overtime protection for the employee. In most cases that will mean the federal test because of the higher salary requirement.

In some states, like California, their rules are already more strict. In those states, the new federal rules will have no impact because an employee will still have to be paid overtime if he or she does not meet the stricter state test. This may include the highly compensated employee test if, as in California, there is no test under state law that would allow an employee to be exempt by meeting only one of the duties requirements of the executive, administrative or professional exemption. The current overtime rules in Illinois are not as strict as the new federal rules, but the legislature passed a law last month that said that if an employee was eligible for overtime as of March 30, 2004, he or she can keep that eligibility even if he or she would be exempt under the new regulations. The bottom line is that employers in all states should check both federal and state rules before modifying the exempt status of an employee.

What Should You Do?

Here is a list of steps you should take to make sure you are in compliance with the new rules by August 23, 2004.

1. Check your state’s overtime rules to find out whether they are more protective than the new federal rules will be.
2. Get details on the new federal regulations. While the new tests have not changed significantly, it is important to know all of the details of the new rules to make sure you apply the tests correctly.
3. Evaluate the exempt status of all of your positions. If you have a lot of different positions in your company, in the interest of time, review positions exempt from overtime first before nonexempt positions since there is a penalty for not paying overtime to employees who are eligible.
a. Check positions exempt under the administrative exemption since those are more likely to change to nonexempt than positions under the other exemptions.
b. Check the salary of each position to make sure that it is at least $455 per week. If not you must raise it to that level or change the status of the position to nonexempt and eligible for overtime.
4. If a position will become eligible for overtime under the new rules and you do not want to adjust the salary or duties so that it remains exempt, you must change the exempt status by August 23, 2004 or risk penalties for failure to pay overtime.

Technology Corner: Another E-Mail Scam - It's Phishing Not Fishing!
By Richard Noland, Ph.D.

That’s right, phishing. This is the latest scam hitting e-mails across the country. According to the Anti-Phishing working group:

"Phishing attacks use 'spoofed' e-mails and fraudulent websites designed to fool recipients into divulging personal financial data such as credit card numbers, account usernames and passwords, social security numbers, etc. By hijacking the trusted brands of well-known banks, online retailers and credit card companies, phishers are able to convince up to 5% of recipients to respond to them."

If you get an e-mail that looks like it is from eBay, PayPal or another service you use and it says you need to reply to the e-mail or click on a link to update your information – it most likely is someone in Europe or Asia phishing for your personal information so they can defraud you.

How do you protect yourself? Don’t respond to any e-mail asking for personal information. Instead, delete the e-mail and then, if you think it might be legitimate, go to the company's website via your normal method and log in. Most likely, if the company really needs the information that was asked for in the e-mail, they will have a notice on the website or your log in page as well.

Different kinds of scams have risen from about 178 in January to over 700 in March. For more information go to http://anti-phishing.org.