The New Overtime Rules

Q: I heard something about a big change in the overtime laws this year, and I'm wondering whether it will have any effect on my payroll. Can you tell me how the new regulations apply to retail stores?

A: This summer, the Department of Labor made the first major change to U.S. overtime regulations since 1975. According to Labor Secretary Elaine Chao, "The Department's reform will strengthen overtime protections for millions of low-wage and middle-class workers."

Overtime laws are intended to protect employees from working without adequate compensation. Retail businesses are sometimes guilty of this type of exploitation. I know of a discount store that called many of its 20-year-old employees "managers," and gave them a salary to cover the hours they were required to work — often 45 to 50 hours per week — without additional pay.

The current requirement for overtime is that non-exempt workers be paid 1½ times the regular hourly salary for any time in excess of 40 hours per seven-day work week. If you already pay a bonus for working on Sunday, that doesn't count as the required overtime pay. It must be calculated separately, based on the exact hours worked in excess of 40. And you can't give an employee an hour off during the next pay period to compensate for the extra hour worked, even by mutual agreement.

These facts regarding overtime have not changed. What's new under the Fair Pay regulations is how you calculate whether a salaried employee, such as a store manager, is exempt from these overtime regulations. One of the factors in making this determination is a salary threshold. In the past, anyone earning more than $155 a week ($3.85 an hour) could be considered exempt from overtime. According to the new law, the base salary is $455 a week ($11.35 an hour).

Does this mean that anyone on your staff earning over $455 a week is automatically exempt from being paid overtime? Unfortunately, the regulations are not that simple. In addition to the minimum salary, an employee's duties must also qualify for exemption by being executive, administrative, or professional. It's not enough that an employee has an administrative title or that the employee is salaried rather than paid an hourly wage.

To meet the exemption requirement, an employee must perform work directly related to assisting with running or servicing the business — as distinguished, for example, from selling products in a retail establishment. On its website ( www.dol.gov/esa) the Department of Labor's Employment Standards Administration states, "Often, in retail businesses, salaried employees do not meet all the requirements specified by the regulations." If you're unsure of the overtime status of any employee, visit the website or call 1-866-4USWAGE (1-866-487-9243) for clarification.

Q: Our sales have been declining slowly but surely over the past two years, and I'm looking for new ways to keep my home decor shop afloat. One of my employees suggested we tap into Internet sales. Is a website the answer?

A: The Internet has been the savior of some specialty retailers, and undoubtedly has hastened the demise of others. One of the key questions you need to ask yourself is whether you have the kinds of products consumers would look for online. A card shop, for example, probably has few items shoppers can't buy locally. Some of your unique home decor items, however, might be in short supply in many parts of the country.

The second question is how you are going to bring customers to your website. Just as a retail store must advertise to attract new shoppers, a website has to be discovered by customers interested in its products. Search engines are a fundamental way to promote a website; paying for placement on a site such as Google can attract shoppers. The more unusual the product you're selling, the less expensive it will be to pay for good visibility. For instance, the keywords "computer software" are in great demand and therefore expensive. It works to your benefit that the words "flea market étagère" are not.

Another way to bring customers to your site is to sell items through a major shopping site such as Amazon or eBay. Resources are available to help you get started with this, including the help sections on the websites themselves. These listings will allow you to promote your own site, either through your listings on their sites or by following up with the consumer after the sale is made. You may also be able to arrange for other sites to link with your site as an "affiliate." This is usually done in exchange for a small fee.

It's been said that all retailers are the same size on the computer screen. Unfortunately, it isn't true. You'll be competing with sophisticated, experienced web merchants. Building a website that is competitive can be quite expensive. At the very least you'll need a secure "shopping basket," so that payment can be made online via credit card. Ideally, you should also have a search engine on the site, so that consumers can find the products they want. Good digital images of all the products are a must, together with clear descriptions.

Your store will also need to be prepared to accept the Internet orders, with efficient shipping and a good method for processing and tracking orders. If you don't have the funds, or the time, to invest in the website, including promotion and all the systems necessary, the Internet probably isn't the answer to your current woes.