New FairPay Rules Take Effect August 23

New FairPay Rules Take Effect August 23 New Wage & Hour Regs Impact Overtime Entitlement

Last April, the U.S. Department of Labor published a final rule revising its Fair Labor Standards Act regulations governing overtime eligibility for –white-collar” workers. The –FairPay” rules, as they are called, take effect on August 23, 2004. Before then dealers should review the duties, job descriptions and pay structures of their employees. It is also recommended that dealers consult with their tax advisors, CPAs and other advisors in order to be in compliance by August 23.

In short, the new FairPay rules expand the number of workers eligible for overtime by raising the annual salary threshold from $8,060 or less to $23,660 or less. The rules simplify and continue exemptions from both minimum wage and overtime for executive, administrative, professional, and outside sales employees.

The rules also contain new exemptions for certain computer employees, creative professional employees, and a highly compensated employee exemption. However, the new FairPay rules have no impact on other exemptions such as salespeople, parts department workers, technicians or commissioned employees.

Generally, to be eligible for a –white collar” overtime exemption, an employee must meet certain criteria for job duties, and be paid on a salary basis at not less than $455 per week.

For example:

Executive Employee Exemption (applies to dealers, dealership managers and shop foremen) To qualify for the executive employee exemption, employees must:

Be compensated on a salary basis at a rate not less than $455 per week; and

Manage the enterprise, or a recognized department of the enterprise as their primary duty;

Regularly direct the work of at least two or more employees; and have the authority to hire or fire other employees, or be authorized to recommend hiring or firing of other employees.

Administrative Employee Exemption (e.g., office managers and assistant managers) Here, the employee must:

Be paid a salary of at least $455 per week;

Engage in office or non-manual labor directly related to management or general business operations; and

Have discretion and independent judgment with regard to matters of significance.

–Incorrectly classifying employees as exempt could lead to liability for back pay, liquidated damages, interest, and even attorneysê fees,” according to NADA. –On the other hand, incorrectly classifying employees as nonexempt may mean your labor costs are higher than they should be. Consider taking this opportunity to review the exempt/nonexempt status of alldealership employees, not just those covered by the FairPay rule.”

For more information on the new rules, NADA has posted a comprehensive Q&A on the FairPay Rule for Automobile and Truck Dealerships on its Web site, nada.org.

The Q&A is available to members by logging onto –Members Only” and clicking on –Regulations.” NADA members can also refer to NADAês A Dealer Guide to Federal Wage-Hour Law and Equal Pay Act(L.1) for further details on wage/hour record keeping and the length of time records must be kept. Dealers may contact NADA Regulatory Affairs at (703) 821-7040, or regulatoryaffairs@nada.org.

Additional information is available at the Department of Laborês Web site, www.dol.gov/esa/regs/compliance/whd/fairpay/main.htm.