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Fair Labor Standards Act (FLSA) Overtime Rules Revised

We have received numerous inquiries from clients regarding the U.S. Department of Labor rules amending the FLSA's overtime provisions that went into effect August 23, 2004 accompanied by much media coverage. These amended rules require that all salaried (exempt) workers who make less than $23,660 per year ($455 per week) be paid overtime for hours worked in excess of 40 hours in a week. This has little impact on domestic employment, which remains non-exempt employment (employment subject to overtime rules).

Domestic workers who live out (come-and-go) continue to have overtime calculated as 1.5 times their hourly wage for all hours in excess of 40 in a week. Domestic workers who live in with their employer have their overtime calculated at their regular hourly rate - there is no overtime rate differential.

Crafting a FLSA Compliant Work Agreement

Nanny employers, as well as employers of other types of domestic workers, need to be very careful in their definition of weekly wages in an employment contract to protect themselves against wage and hour disputes with disgruntled employees. The following examples are provided to illustrate how a compliant work agreement can be crafted.

SITUATION: The Smith family wishes to hire Linda to be a nanny for their family. Linda's scheduled workweek is Monday thru Friday 7:30 AM - 5: 30 PM. The Smith family agrees to pay Linda, who does not live in their home, $425 per week.

CONTRACT:
Compensation: Position will pay $7.72 per hour, with a weekly guaranteed minimum of $425 per week.

ANALYSIS: Linda's workweek is scheduled to be 50 hours. This is mathematically structured as 40 hours at $7.72 and 10 hours at $11.58 (1.5 * 7.72). Any hours worked in addition to the 50 scheduled would need to be compensated at the overtime rate of 11.58 per hour because Linda does not live with her employer. The weekly guarantee is the equivalent pay for 50 hours.

SITUATION: The Martin family wishes to hire Mary to be a nanny for their family. Mary will live in the Martin family's home. Mary is scheduled to work from 7 AM to 6 PM Monday through Friday. The Martin family offers Mary the position at $440 per week.

CONTRACT:
Compensation: Position will pay $8 per hour, with a weekly guaranteed minimum of $440 per week.

ANALYSIS: Mary's workweek is 55 hours and she is not entitled to the overtime differential because she is a live-in domestic. Her hourly rate is calculated by dividing the total weekly salary by the scheduled hours worked. Overtime for hours in excess of the 55 per week would be compensated at $8 per hour.

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Summary

Employers who state their domestic employee's pay only in terms of a weekly salary run the risk of having a court interpret this as a standard salary for a 40-hour workweek. Remember, domestic employment by definition is non-exempt employment. This means you cannot offer a salary that covers any number of work hours, but must pay overtime for hours worked above 40 in a week. By structuring the work agreement with wages paid at an hourly rate and by agreeing to a guaranteed weekly minimum, the family is protecting itself from possible wage disputes and meeting the nanny's desire for a predictable weekly wage.

RELATED LINKS

 FREE Calculator: Calculate Hourly Wage

 State Minimum Wages

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