Earlier this month, the federal government implemented new rules regarding overtime pay significantly increasing the number of workers who are eligible for overtime. The US Department of Labor’s publication of the new rule can be found here: https://www.dol.gov/sites/default/files/overtime-overview.pdf
The new rule is targeted at white collar workers, but many household employers and employees are wondering how they are impacted by this new rule and what they need to know about overtime laws.
The Fair Labor Standards Act (FLSA) classifies if a worker is exempt or nonexempt which controls how overtime should be handled. With limited exceptions, household employees are considered nonexempt employees meaning they must be paid minimum wage and overtime.
Currently, any employee that earns $23,660 per year or less is nonexempt (meaning overtime pay is required). This limit increases to $47,476 per year effective December 1, 2016 under the new rule.
In addition to the earnings consideration, the typical duties and schedule for most household employees dictates that they are nonexempt and must be paid overtime.
Certain household employees may be considered exempt based on their duties (estate or house managers, for example). Historically, there have been laws excluding certain household workers from overtime protection (personal attendants, for example), although many of those laws have changed in recent years.
Practically speaking, we often find domestic employees often negotiate so they earn a certain amount per week or per check, like a salary, without even considering an hourly pay rate or overtime. We encourage household employers to refigure their employee’s pay so that the employee continues to take home their desired per check amount, but to calculate the pay so that hourly/overtime pay are reflected as opposed to a lump sum (e.g. instead of paying a fixed $550 per week, pay 40 hours at $10 and 10 hours at $15 for overtime). Having an agreed upon pay rate including overtime will also save potential headaches and confusion down the road if the employee works more or less than originally expected and the pay needs to be adjusted.
If you are unsure if your household employee is exempt or nonexempt and how to handle overtime, please call one of our account specialists for a free consultation.