Yikes, Professionals Getting Overtime?

Yikes, Professionals Getting Overtime?

Many managers of professional firms take comfort in the general rule that salaried professionals are exempt from overtime compensation both under the Fair Labor Standards Act (“FLSA”) and New Jersey’s Wage and Hour Law (“NJWHL”). However, there is a little known exception to the professional exemption that managers of professional practices should know.

Under New Jersey law a person is an exempt professional if four conditions are met. First, the employee must do the work of a professional. The administrative code recognizes three types of professional work. The first category is work that requires knowledge of an advanced type in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction and study and requires the consistent exercise of discretion and judgment. This covers the traditional professions of law, accounting, medicine, architecture and engineering.

Another type of professional work is original and creative in character in a recognized field of artistic endeavor which depends primarily on the invention, imagination or talent of the employee.

Finally, a person employed as a computer programmer, software engineer or as a similarly skilled worker in the computer software field whose work requires theoretical and practical application of highly-specialized knowledge in computer systems analysis, programming, and software engineering is viewed as a professional.

The second requirement is that the work performed must be predominantly intellectual and varied in character and of such a character that the output produced or the results accomplished cannot be standardized to a given time period.

The third requirement is that a professional must devote less than 20 percent of his or her workweek to nonexempt work.

Finally, the employee must be paid on a salary or fee basis at $400.00 or more per week. N.J.A.C. 12:56:7.3.

So what happens if a law firm or accounting firm decides to hire a part-time associate on an hourly basis? Certainly, so long as the part-timer does not work more than 40 hours in a work week, overtime is not an issue. But what happens if the workload increases and the part-timer’s hours exceed 40 hours in a work week? Since they are not salaried, the normal reaction is that they aren’t entitled to overtime. Well, here’s the catch. In order for an hourly professional to be exempt from overtime, his or her hourly rate has to be at least $27.63. N.J.A.C. 12:56-7.6(b).

In this tight economy it is easy to imagine a professional firm hiring an inexperienced associate on a part-time basis at an hourly rate that is less than $27.63. However, if there is an influx of work that provides more than 40 hours of work per week for the associate, the employer could owe the employee overtime compensation for each workweek in which more than 40 hours were worked. This could force the employer to increase the hourly rate to $27.63 to avoid these overtime hits.

If you have questions about overtime compensation under federal or state law, please contact Tom Barron at www.barpostlaw.com or 856-642-6445.

-Tom Barron

***The information included in this newsletter is not, nor is it intended to be, legal advice. You should consult an attorney for advice regarding your individual situation. We invite you to contact us and welcome your calls, letters and electronic mail. Contacting us does not create an attorney-client relationship. Please do not send any confidential information to us until such time as an attorney-client relationship has been established.

N.J.A.C. 12:56-7.6 generally states that “(a) Employees in a bona fide executive, administrative or professional capacity and outside sales persons shall be exempt from … overtime [pay] requirements.