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OVERTIME GUIDE

GUIDE TO THE OVERTIME PROVISIONS OF THE FAIR LABOR STANDARDS ACT,

THE PORTAL TO PORTAL ACT AND RELATED FEDERAL REGULATIONS

As of 10/31/1996

1. EMPLOYEES PAID BY THE HOUR

Employees whose gross pay is generated by multiplying the number of hours worked by the hourly rate of pay are entitled to receive 1 times the hourly rate for each hour worked in excess of 40 in the week. For example, an employee who earns $10 per hour should receive $10 per hour for the first 40 hours worked in a week, and $15 for each additional hour worked.(1)

Trial lasted three days before U.S. Magistrate Barry Garber. Cigarette's lawyer, Anthony Stonick, argued that Arencibia quit after the company refused to lay him off. Curbelo denied insulting Arencibia -- or firing him.

Jurors found Cigarette's age discrimination ``willful.'' Under federal law, thatautomatically doubles his $110,457.66 award for back pay. Jurors also awarded $150,000 in punitive damages and $50,000 for emotional injury.

Arencibia, once a captain in Fidel Castro's army, became an active member in Alpha 66, the militant exile anti-Castro brigade. He's now a security guard at a hardware store.

2. EMPLOYEES PAID BY THE HOUR WHO RECEIVE COMMISSIONS

Hourly employees who satisfy certain conditions are exempt from the overtime requirements of the Fair Labor Standards Act. (2) Each of the following requirements must be met:

a) The employer must be a retail or service establishment.

b) The employee's "regular rate of pay" must be in excess of 1 times

the federally mandated minimum wage. The "regular rate of pay" is calculated by dividing the employee's total remuneration in any workweek by the hours actually worked in that week. As of October 1, 1996, the minimum wage rose to $4.75 per hour. On September 1, 1997, the minimum wage will be $5.15 per hour.

c) More than half of the employee's compensation for a "representative period" must be derived from commissions on goods or services. The "representative period" must be not less than one month.

3. SALARIED EMPLOYEES WHOSE HOURS DO NOT FLUCTUATE

Salaried employees whose hours do not meet the requirements of "fluctuating" or "irregular" hours, as discussed below, receive 1 times the regular hourly rate of pay for each hour worked in excess of 40 in the week. (3) For example, if an employee receives $400 per week, the employee is entitled to an additional $15 for each hour worked in excess of 40 in the week.

When a salary is paid monthly, the regular hourly rate is calculated by multiplying the monthly salary by 12, and then dividing by 52. When a salary is paid bimonthly, or every 2 weeks, the regular hourly rate is calculated by multiplying the bimonthly salary by 24, and then dividing by 52.

4. SALARIED EMPLOYEES WITH "FLUCTUATING HOURS"

Federal regulations provide that a salaried employee whose hours fluctuate from week to week may be paid a fixed salary plus his or her regular rate of pay for each hour worked in excess of 40 in the week. The rationale behind this regulation is that the employee has already been paid a straight hourly rate for each hour in excess of 40, and is only due the additional pay. (4) Each of the following requirements must be met in order to use this pay method:

There must be a clear mutual understanding between the employer and the employee that the fixed salary is compensation (apart from overtime premiums) for the hours worked each workweek, whatever their number, rather than for some fixed weekly work period.

b) The amount of the salary must be sufficient to provide compensation consistent with the minimum wage requirement for each hour worked in the workweeks in which the number of hours worked is greatest.

c) The employee must receive compensation, in addition to the fixed salary, for each hour in excess of 40 worked in a given week at his or her regular rate of pay.

Since the employee's weekly hours fluctuate, the regular rate of pay will also vary from week to week. The regular rate for each week is determined by dividing the fixed salary by the number of hours worked during the week.

5. SALARIED EMPLOYEES WITH "IRREGULAR HOURS"

The Fair Labor Standards Act contains an exception to the requirement of overtime pay where the employee works "irregular hours" and certain other requirements are met. (5) If this exception applies, the employer may pay the employee a guaranteed salary at an amount that compensates overtime for up to 60 hours per week. Each of the following requirements must be met for this exception to apply:

a) The employee must be employed pursuant to a bona fide individual contract or collective bargaining agreement.

b) The agreement must specify a regular rate of pay which meets the minimum wage requirement and must provide for additional compensation at 1 times the regular rate for all hours worked in excess of the agreed-upon workweek.

c) The agreement must provide a weekly guaranty of pay for not more than 60 hours based on the rates specified.

d) The nature of the employee's duties must be such that neither the employee nor the employer can control or anticipate with any degree of certainty the number of hours required to be worked from week to week.

6. SALARIED EMPLOYEES WHO RECEIVE COMMISSIONS

Salaried employees who satisfy certain conditions are exempt from the overtime requirements of the Fair Labor Standards Act. (6) Each of the following requirements must be met:

a) The employer must be a retail or service establishment.

b) The employee's "regular rate of pay" must be in excess of 1 times

the federally mandated minimum wage. The "regular rate of pay" is calculated by dividing the employee's total remuneration in any workweek by the hours actually worked in that week. As of October 1, 1996, the minimum wage rose to $4.75 per hour. On September 1, 1997, the minimum wage will be $5.15 per hour.

c) More than half of the employee's compensation for a "representative period" must be derived from commissions on goods or services. The "representative period" must be not less than one month.

7. EXECUTIVES, ADMINISTRATORS AND PROFESSIONALS

Any employee who is employed in a bona fide executive, administrative or professional capacity is exempt from the overtime requirements of the Fair Labor Standards Act if all of the following requirements are met: (7)

a) The employee's primary duty must consist of the management of the enterprise in which he or she is employed or a customarily recognized department or subdivision thereof.

b) The employee must regularly direct the work of two or more other employees.

c) The employee has the authority to hire or fire other employees or the employee's recommendations regarding hiring or firing are given particular weight.

d) The employee regularly exercises discretionary powers.

e) The employee, if not employed by a retail or service establishment, must not devote more than 20% of the workweek to the performance of duties not closely related to those described in sections a through d above.

f) The employee, if employed by a retail or service establishment, must not devote more than 40% of the workweek to the performance of duties not closely related to those described in sections a through d above.

g) The employee must be compensated on a salary basis at a rate of at least $155 per week.

An employee who is compensated on a salary basis at the rate of at least $250 per week and whose primary duty consists of the management of the enterprise in which he or she is employed or a customarily recognized department or subdivision thereof, and includes the direction of two or more other employees is deemed to meet the requirements of the executive exemption, notwithstanding the requirements outlined above.

8. PENALTIES FOR VIOLATION OF THE OVERTIME REQUIREMENTS

While the goal of this guide is to enable compliance with the overtime requirements of the Fair Labor Standards Act, it is important to understand the potential consequences for violation of these requirements. (8) An employee who had not been paid overtime as required by the law is entitled to sue for the amount of unpaid overtime compensation plus an equal amount as liquidated damages (this means double damages). These liquidated damages are mandatory unless the employer proves that the underpayment of wages was in good faith. Reliance on the advice of counsel regarding payment of an employee may be sufficient to demonstrate good faith and thus avoid liquidated damages. The law also provides for the payment of the employee's costs and attorney's fees by the violating employer. This award of attorney fees is mandatory. In certain cases, the attorney fees may exceed the amount of damages owed to the employee.

Lawsuits to recover unpaid overtime may be brought by either the employee or the federal government. There is also a provision for civil fines for violation of the Fair Labor Standards Act. Note that is also unlawful to retaliate against an employee because such employee has filed a complaint or instituted any proceeding related to the Fair Labor Standards Act. (9)

9. JURISDICTION AND STATUTE OF LIMITATIONS

The Fair Labor Standards Act provides that an employee may bring suit in state or federal court for that employee and other employees similarly situated. (10) Thus, there exists the potential for a large lawsuit involving multiple plaintiffs to result from a single disgruntled employee. The Portal to Portal Act provides that a lawsuit to recover unpaid overtime wages must be brought within two years of the violation. However, if the violation was willful, the employee has three years in which to file suit. (11)

10. ADDITIONAL NOTES

The Fair Labor Standards Act, the Portal to Portal Act and related Federal Regulations constitute a complex and highly technical field of law. This Guide provides general assistance in complying with the overtime requirements. For assistance in addressing specific fact situations or close questions, please consult with your attorney.

ENDNOTES

  1. See 29 U.S.C. 207(a); 29 C.F.R. 778.110.
  2. See 29 U.S.C. 207(i).
  3. See 29 C.F.R. 778.113.
  4. See 29 C.F.R. 778.114.
  5. See 29 U.S.C. 207(f); 29 C.F.R. 778.405.
  6. See 29 U.S.C. 207(i).
  7. See 29 U.S.C. 213(a)(1); 29 C.F.R. 541.1.
  8. See 29 U.S.C. 216(b).
  9. See 29 U.S.C. 215(a)(3).
  10. See 29 U.S.C. 216(b).
  11. See 29 U.S.C. 255.
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