Who Must be Paid Overtime?

Date Published: 
March, 2004
Original Author: 
Michael S. Pepperman, Esq
Jacob M. Sitman, Esq
Obermayer Rebmann Maxwell & Hippel LLP
Original Publication: 
ICFM Magazine, March-April 2004

Compensation issues are always challenging. Funeral home and cemetery owners and operators often find that even seemingly simple questions such as which employees must be paid overtime are difficult to answer.

The answer to the overtime question is determined through application of federal (and sometimes state) law and depends on a combination of several factors, including, but not limited to, the amount earned by the employee, the method used to calculate the employee's earnings, the nature of the work performed by the employee, the employee's education and training and the degree of discretion and independent judgment exercised by the employee in his or her job.

Overtime Under Federal Law and the 'White Collar' Exemptions
The Fair Labor Standards Act (FLSA) is the federal law that requires most employers to pay employees at least a minimum wage and, in certain instances, overtime pay. In general, the FLSA requires employers to pay overtime in the amount of one and one-half times their regular rate of pay for all time each employee works in excess of 40 hours per week.

However, the FLSA provides exemptions from the overtime payment requirements for certain employees. The most commonly applicable exemptions are for employees who are paid on a salary basis and earn over $250 per week, including but not limited to employees employed in “a bona fide executive, administrative or professional capacity" [29 U.S.C. Sec. 213(a)]. These exemptions are often referred to as "white-collar" exemptions and generally do not include employees whose primary duties involve manual labor. Exempt employees need not be paid overtime under federal law.

To be exempt from the overtime requirements of the FLSA under one of the white collar exemptions, an employee must satisfy certain criteria. For example, to qualify as an exempt "professional," an employee's primary duty must be the performance of work requiring knowledge of an advance type in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction and study, and the employee must consistently exercise discretion and independent judgment in the performance of job duties.
Some courts have decided that licensed funeral directors, if salaried and earning more than $250 per week, may qualify as "professionals" and be exempt from the FLSA overtime payment requirements.

For example, in the case Buttin v. Prime Succession Inc., 6 WH Cases 2d 359 (6th Cir. 2000), the U. S. Circuit Court for the Sixth Circuit decided that a licensed funeral director and embalmer was a professional employee exempt from the FLSA's overtime requirements.

In that case, the funeral director and embalmer was licensed by the state of Michigan; had completed a year of mortuary science school and two years of college, including classes such as chemistry and psychology; had taken the national board tests covering embalming, pathology, anatomy and cosmetology; practiced as an apprentice for one year; and passed a state examination. In his job, he was responsible for supervising and coordinating the removal of bodies from residences, hospitals and nursing homes; organizing, directing and supervising funerals; performing embalming procedures, including adjusting those procedures to the condition of the deceased; and counseling families.

Although the Butlin case is not binding precedent for everyone around the country, it suggests that if you employ a funeral director with qualifications and job responsibilities similar to those mentioned in the Butlin case, he or she may be exempt from the FLSA's overtime provisions.

It is important to note that cemetery and funeral home employees may also qualify as "executive" or "administrative" employees and be exempt from the FLSA overtime payment requirements.

A salaried employee earning $250 per week or more is "executive" and exempt from overtime if the employee's primary duty consists of the management of the enterprise or a customarily recognized department or subdivision and he or she customarily and regularly directs the work of two or more other employees.

A salaried employee earning $250 per week or more is "administrative" and exempt from overtime if the employee's primary duty consists of office or non-manual work directly related to management policies or general business operations of the employer or the employer's customers, and the employee's work requires the exercise of discretion and independent judgment.

Again, it is important to individually assess each employee's circumstances to determine whether he or she is exempt or must be paid overtime. Good recordkeeping and accurate job descriptions will aid in the assessment process.

The Federal Law Is About to Change
The rules concerning employers' overtime obligations will soon change. The U.S. Department of Labor is currently in the process of making substantial revisions to the regulations concerning the white collar exemptions and overtime payment. Once those revised regulations become final, employers should consult their legal advisers to determine how the changes in the law affect them and the way in which they compensate their employees. (The changes will also be covered in part 2 of this article.)

State Laws Overtime Laws
Keep in mind that states often have their own laws regarding the payment of overtime. While state overtime and wage payment laws do not conflict with FLSA requirements, they often contain additional requirements.

Making correct and consistent compensation decisions is critical to maintaining employee morale and minimizing liability under federal and state law. It is worth the time to do it right.

Michael S. Pepperman, Esq . and Jacob M. Sitman, Esq . are with the Philadelphia law firm of Obermayer Rebmann Maxwell & Hippel LLP. Pepperman's practice is restricted to the representation of management in labor and employee relations. Silman concentrates his practice in employment discrimination litigation, restrictive covenants and labor-management relations.