Overtime Pay Requirements for Maintenance Staff
Dena B. Calo, Esq.
Saul Ewing LLP
The question often arises whether maintenance supervisors should be classified as “exempt” or “nonexempt” employees. Below is a discussion of the legal requirements that allow employers to designate an employee as exempt from the overtime laws and thus, no matter how many hours that employee works in a given week, no overtime pay would be required. More often than not, however, employees who work more than 40 hours in a given week should be getting paid overtime under state and federal laws. The more difficult issue is figuring out when an on call employee is entitled to overtime pay.
Under the New Jersey Wage and Hour Law (NJWHL) as well as the Federal Labor Standards Act (FLSA), employees who work over 40 hours in a work week must be paid time and a half their hourly rate for each hour worked over 40 unless the employee falls within one of the listed exemptions. This is true whether the employee is paid “hourly” or a “salary.” It is not the type of pay that is given to the employee that determines whether or not they are entitled to overtime, but the duties they perform for their employer.
It is easier to define the people who do not qualify for overtime pay than those who do. That is because most employees qualify for overtime pay. Employees who are executives, administrators or professionals are not eligible to receive overtime pay, provided they meet certain qualifications and job requirements. Under the NJWHL as well as the FLSA, simply having the title of executive or administrator does not automatically exempt a person from receiving overtime pay. Below is a closer look at the major exempt categories and the job responsibilities that defines those categories under the law.
A.) The Salary Test
In order to qualify for an overtime exemption under the FLSA, an employee must be paid a certain amount per week. Under federal law, the amount is not less than $455 per week and under NJ law, not less than $400 per week. If employees are paid less than these amounts, they are considered non-exempt, meaning they are entitled to overtime.
Also, highly compensated employees, those earning over $100,000 are generally considered exempt from overtime. So the first thing to consider is how much your employees are being paid.
B.) The Duties Test
The next thing to consider is the duties that the employee is actually performing at work. This is called the “duties test.” In general, this means that the employee must be an executive, administrator or professional. The titles of these employees is not the issue but generally, it is the level of supervision, responsibility and discretion in the employee’s job that must be reviewed to determine if the employee is exempt from overtime laws.
Under the FLSA, an “Executive” is any employee (1) whose primary duty is managerial (e.g., setting rates of pay, overseeing safety and security, appraising performance and productivity, handling employee complaints, determining work techniques and planning work, setting budgets, etc.); (2) who customarily and regularly supervises the work of two or more other employees; and (3) has genuine input into the job status of other employees (e.g. hiring, firing, discipline). In New Jersey an executive must also regularly exercise discretionary authority at work. If the employee has these duties, he is considered an executive and is exempt from overtime.
An administratively exempt employee must perform (a) office or nonmanual work, which is (b) directly related to management or general business operations of the employer or the employer's customers, and (c) a primary component of which involves the exercise of independent judgment and discretion about (d) matters of significance.
Under New Jersey law the administrative employee must also regularly and directly assist an employee employed in a bona fide executive or administrative capacity. In New Jersey, an administrator also includes an employee whose primary duty is sales activity, and who receives at least 50 percent of his or her total compensation from commissions. Examples of administratively exempt employee include labor relations and human resources personnel, payroll and finance (including budgeting and benefits management), records maintenance, accounting and tax, marketing and advertising (as differentiated from direct sales), quality control, public relations (including shareholder or investment relations, and government relations), legal and regulatory compliance. These employees generally fall under the administrative exemption and do not need to be paid overtime.
The professional exemption generally applies to those employees who perform work requiring knowledge of an advance type in a field of science or learning, customarily acquired by a prolonged course of a specialized intellectual instruction (the “learned professional exemption”); or requiring invention, imagination, originality or talent in a recognized field of artistic or creative endeavor (the “creative professional exemption”). The “field of science or learning” includes the professions of law, medicine, theology, accounting, actuarial computation, engineering, architecture, teaching, and various types of physical, chemical and biological sciences, pharmacy and other similar occupations that have a recognized professional status as distinguished from the mechanical arts or skilled trades. The highly specialized or professional employees are also exempt from overtime.
Must an Employee pay employees for On Call time?
Generally, the a maintenance worker is entitled to overtime because in all likelihood, he would not meet one of the described exemptions listed above. As a result, if he works more than 40 hours a week, he is entitled to overtime pay - which is generally time and a half his hourly wage.
The more difficult determination is how to calculate this individual’s hours when he is “on call.” Do you calculate every hour he is carrying a pager and can be called into work or do you only pay for the time he is actually working on the property? Under the NJ Wage and Hour Law, there are four main factors that are considered when deciding whether or not a person who is on-call is actually performing work for the employer: (1) Whether the employee is confined to a limited area while they are on-call, and has to carry a beeper or cell phone; (2) The frequency of calls and the nature of the employer’s demands; (3) The employer’s ability to maintain a flexible on-call schedule and switch on call shifts; and (4) whether the employee actually engaged in personal activities during on call time. Under the FLSA, only two factors are considered: (1) whether the employee is required to remain on the premises; and (2) if he finds his time on-call away from the employer’s premises so restrictive that it interferes with his or her personal pursuits.
In an opinion letter issued by the federal Department of Labor in 2009, the following facts were offered by an on call employee and he asked for an opinion about whether he should have been paid by his employer. The employee said that while he was “on call,” he had to be reachable at all times, could not drink alcohol and had one hour to report after receiving a call. He did not receive call-backs often, but his employer limited how much overtime he worked when on call and disciplined employees who did not follow the on call restrictions. Based on those facts, the DOL determined the restrictions were not enough to turn the on call time into paid hours worked. Hopefully this example will guide you in the proper on call payment procedures for your employees. Remember though that when the employee is actually on a call for the employer, that time must be paid by the employer, and if it puts the employee over 40 hours in a week, then it is considered overtime.
As an employer it is important to determine which of your employees are exempt from or qualifies for overtime pay. It is best not to wait until a audit or lawsuit, which can be time consuming and expensive even if it is not valid. Analyzing your workforce now is the best way to defense a case later.
Dena B. Calo, Esq. is a partner at Saul Ewing LLP. Dena Calo is a seasoned HR strategist and employment lawyer who operates out of the firms Philadelphia, PA, and Princeton, NJ, offices. She counsels management clients on human resource practices and employment law at a time when employers’ labor and employment policies and procedures face increasing scrutiny. As part of her practice, Dena assists clients in preparing and reviewing employee handbooks, and helps them establish and audit their HR practices and procedures. She also conducts on-site investigations and trains organizations on best HR practices and programs.