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Wednesday, 30 June 2004 17:00

Labor Department issues new overtime rules

U.S. Secretary of Labor Elaine L. Chao announced in April the final regulations governing overtime eligibility for "white-collar" workers under the Fair Labor Standards Act. The regulations had not been substantially updated for over 50 years, creating confusion for workers and employers, generating wasteful class action litigation, and failing to effectively protect workers' pay rights, according to the Department of Labor. 

In the collision repair industry, the new law would most likely impact estimators at low-volume shops, many of whom are paid on a salary plus commission basis.

"Today, workers win. The department's new rules guarantee and strengthen overtime rights for more American workers than ever before," said Secretary Chao. "When workers know their rights and employers know how to pay workers, everybody wins," added Chao. "With the FairPay rule, we are restoring overtime to what it was intended to be: fair pay for workers, instead of a lawsuit lottery. And we will use these new clear standards to vigorously enforce the overtime laws on behalf of workers, building on this Administration's strong record of pro-worker wage and hour enforcement."

The new rules expand the number of workers eligible for overtime by nearly tripling the salary threshold. Under the 50-year-old regulations, only workers earning less than $8,060 annually were guaranteed overtime. Under the new rules, workers earning a salary of $23,660 annually ($455.00 week) or less are guaranteed overtime after 40 hours a week (in some states, such as California, the overtime starts after 8 hours in a single day). The law primarily protects workers who are paid on a salary rather than an hourly basis. In some industries, fast food in particular, first-level managers are given a salary and then asked to work excessive hours without any additional compensation.

The Labor Department says the new federal law strengthens overtime protection for 6.7 million low-wage salaried workers, including 1.3 million salaried white collar workers who were not entitled to overtime pay under the existing regulations. These workers will gain up to $375 million in additional earnings every year. To provide even stronger overtime protection for workers, the FairPay rules add new sections that clearly state that "blue-collar" workers, including police officers, fire fighters, paramedics, emergency medical technicians, and licensed practical nurses are entitled to overtime protection.

For workers earning a salary of less than $455.00 per week, there are no exceptions to the overtime rules. Salaried workers earning above that amount are also entitled to overtime pay unless they fall into an "exempt" category based on their job functions. These employees include executive, administrative and professional jobs, certain computer workers, and outside sales people. The definitions for these exempt jobs are very specific. The exemption depends on the work the person actually performs, and not job title. This is where many employers run afoul of the wage and hour laws - mistakenly thinking that a job is exempt based on the job title.

For example, estimators are treated as exempt by many shop owners. If the estimator earns more than $100,000 a year in salary plus bonus/commission, then overtime is not a problem. For the vast majority of estimators who earn less than $100,000, overtime pay could be an issue unless the work they perform qualifies them as "exempt" under the executive or administrative exemptions. Qualifying an estimator as an exempt employee would depend on his responsibilities. The person could be exempt if he had considerable latitude in pricing repair jobs; likewise, he could be exempt by acting as a department manager with responsibility for hiring and supervising other employees. On the other hand, an estimator who has no real authority and basically examines the damaged vehicle, enters the data into an estimating system, prints out the result and processes the insurance claim could easily be considered non-exempt and subject to overtime rules.

The department's new FairPay rule will take effect on August 23. For further information about the Fair Labor Standards Act, visit the Department's Wage and Hour Division web page at


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