Recently, President Obama signed an order which directed the Department of Labor to reexamine how employees are paid for working more than 40 hours per week. According to the President, “[o]vertime is a pretty simple idea. If you have to work more, you should get paid more.”

Current regulations, however, are a little more complicated than that. In 2004, President Bush upped the threshold from $250 to $455, but that figure remains well below what it would be had it continued to track inflation – $553. Changing the overtime rules, however, comes at a price and concerns many businesses. If eligibility requirements are altered, then employers – especially small business employers – may have to find ways to cut costs elsewhere, including through employee lay-offs.

Currently, most hourly workers must be paid time-and-a-half if they work more than 40 hours a week. Salaried workers making more than $455 (or $23,660 a year) are not eligible for overtime if some of their work is considered supervisory. At issue is whether too many employees are being disqualified from overtime by being labeled as “executive” or “administrative”
(two of the exempt categories), when in reality they are not performing the tasks that are associated with these positions.

Take a look at the guidelines below for the executive and administrative categories and consider whether your employees are properly classified:

Executive Exemption

1. The employee must have a “primary duty” of managing the enterprise or a customarily recognized department or subdivision of the enterprise;

2. The employee must customarily and regularly direct the work of at least two or more other full-time employees (or the equivalent); and

3. The employee must have the authority to hire or fire other employees, or the employee’s suggestions and recommendations as to the hiring, firing, advancement, promotion, or any other change of status of other employees must be given particular weight.

Administrative Exemption

1. The employee’s primary duty must be the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers; and

2. The employee’s primary duty must include the exercise of discretion and independent judgment with respect to matters of significance.