Confusion over OT changes

New overtime pay requirements take effect Dec. 1, and though they were announced in May by the U.S. Department of Labor, there’s still plenty of confusion among local employers about how to apply the changes.

According to the agency, employees earning less than $913 per week, or $47,476 annually, must be paid overtime for any work over the 40-hour baseline – an increase from the previous minimums of $455 per week and $23,600 annually.

Norman LeBlanc, a partner at accounting firm Kahn, Litwin, Renza & Co. Ltd.’s Providence office, says he’s seen a lot of confusion among clients regarding which employees are exempt from receiving overtime.

The confusion, he said, stems from a duties test, which hasn’t changed, used to determine if employees are exempt or not. In the past, many employers simply focused on the wage requirement, which was much lower than the annual pay given most employees with management-level duties or specialized knowledge.

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For an employee to be exempt they must perform managerial tasks, such as supervising others, executive functions, managing the business, or have specialized knowledge that surpasses a degree, such as a lawyer or pharmacist, he said.

LeBlanc singled out the hospitality and technology industries as having “nuances that are making it a bit awkward” to apply the new regulations.

“In technology, there’s a fine line in specialized knowledge; a lot of these people aren’t Ph.D.s, but they’re very good at what they do,” he said.

In the hospitality industry, said LeBlanc, many workers have supervisory roles, but their wages are not high enough to be exempt from overtime.

Companies found in violation of the new regulation will face penalties that include an assessment for unpaid wages for each employee, he said.

Dale Venturini, president and CEO of the Rhode Island Hospitality Association, said she has been issuing reminders for about two months on the coming changes, but still hears from confused members.

Venturini said she has also heard of employees being transferred from salaried pay to hourly pay by companies now looking to avoid having to pay increased overtime.

Simpatico Software Systems President Ken Block said firms in information technology have historically exceeded the pay level that would trigger mandatory overtime. He added all his employees are paid above what will be the new $47,476 minimum, which he called an entry-level IT salary.

But for other companies, “Overtime is a matter of life and death,” he said.

Two lawsuits filed against the U.S. Department of Labor by a coalition of 21 states (Rhode Island is not included) and by the U.S. Chamber of Commerce and other business groups seek to delay the changes from taking effect.

But LeBlanc says employers shouldn’t count on it.

“There is nothing to delay it – it’s going to happen,” he said. •