Fair Labor Standards Act: New Overtime Rules Take Effect

July 1, 2004

Changes to the 1938 Fair Labor Standards Act, referred to by the Labor Department as the "FairPay" rules, went into effect on August 23, 2004. The law comes after decades of lobbying by business groups facing major lawsuits about overtime. Among those are: Wal-Mart, Starbucks, Radio Shack, Rite Aid and Bank of America. The Labor Department's objective in advancing the new rules is an attempt to stop needless litigation by clarifying the rules on who's entitled to overtime.

The revision of the Fair Labor Standards Act is expected to result in overtime wages for 1.3 million low-income, white-collar American workers who didn't have it before. And it is expected to cause 107,000 highly-compensated workers to lose their rights to it.

The federal overtime laws have limited application to California. Employees of private companies are governed by California's more restrictive labor laws. Yet, an estimated 2.3 million federal, state and local government employees in the state are subject to the federal law, although many of them are covered by union contracts that supersede it.

Overtime 101

The 1938 Fair Labor Standards Act set the current standards for pay and overtime and covers about 115 million workers. That law requires employers to pay no less than minimum wage $5.15/hour for all hours worked. For every hour worked above 40 hours in single workweek, the law mandates that employers pay one-and-a-half times the regular rate of pay. But, that law has always had exemptions for certain professions and classes of workers (generally, salaried workers in executive, administrative, professional, outside sales and some computer jobs) - - meaning some employers do not have to pay time- and-a-half.

Who Gains Overtime Under New Law

Workers earning $23,660 or below automatically must receive overtime now. That raises the income bar. Previously, overtime was mandated only for workers who earned $8,060 or less.

Who Could Lose Overtime Under New Law

White-collar workers earning $100,000 or more a year. In addition, people from a number of professions identified as generally exempt from overtime: pharmacists, dental hygienists, physician assistants, accountants, chefs, athletic trainers with degrees or specialized training, computer system analysts, programmers and software engineers, funeral directors, embalmers, journalists, financial services industry workers, insurance claims adjusters, human resource managers, management consultants, executive and administrative assistants, purchasing agents and registered or certified medical technologists. Employers are told to make decisions on a case-by-case basis.

Nurses

Registered nurses who are paid on an hourly basis should receive overtime. Those who are paid on a salaried basis, earning more than $455 a week, no longer have to be paid overtime under federal law.

Emergency Workers and Unions

Emergency workers (including police, firefighters and rescue personnel) will continue to get overtime. The new law clearly states those workers cannot be exempted from overtime. Union workers covered by contracts will not be affected by the change. But organizers say the new rules will make bargaining more difficult when contracts come up for renewal.