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Differences Between State and Federal Overtime Exemption
 Regulations  Cause Confusion with Managers' Salaries

By Sarana Schell, Anchorage Daily News, Alaska
Knight Ridder/Tribune Business News 

Oct. 29, 2003 - When Alaska's legislators made its minimum wage the nation's highest as of this year, $7.15 an hour, that triggered an automatic raise for some managers. 

A clause in the state's overtime-exemption regulations requires certain managers to be paid at least two-and-a-half times the minimum wage. 

The clause is a non-issue, according to state labor officials; they say it is an extension of clear rules in effect since statehood. 

Alaska's hospitality trade association disagrees, maintaining that state overtime-exemption rules are an ill fit for its industry, with the potential to trip up employers. 

A proposed law designed to answer questions about which employees do not have to be paid overtime ends up raising more questions. It would substitute federal rules for Alaska rules, but those rules say employers can pay managers less than the minimum wage. Huh? 

First, an explanation of the clause about paying managers at least two-and-a-half times the minimum wage. 

Alaska labor-law regulations say that employers do not have to pay overtime to salaried employees who do management or professional-type work 80 percent of the time. 

"What we find is that people don't tend to be a little bit pregnant -- they're usually either well under or well over the 20 percent line," state labor standards chief Randy Carr said.

In service or retail industries, employers may shrink that 80 percent down to 60 percent if their managers regularly hop behind the cash register or mop floors in a pinch. 

If employers want to use that 60 percent clause for salaried workers, though, they must pay the managers or supervisors in question at least two-and-a-half times the minimum wage. The rise in this year's minimum wage to $7.15 an hour pushed up the minimum for these managers to $17.875 an hour from $14.125. 

"It's really kind of a straw man," Carr said of the concern that employers will be forced to bump managers' salaries. "All they have to do is control the work of that manager. You tell me: Do I pay the manager 2.5 times the minimum wage to do janitorial work, or do I hire a janitor at minimum wage?" 

It is not always that easy, said Dale Martens, president of the parent company for Alaska's Taco Bell restaurants. One of a manager's primary responsibilities is training, he said, and the state Department of Labor has repeatedly said that does not count toward the 60 percent. 

"That's the rub," Martens said. 

He estimated he had to give raises to 30 percent of his managers to get them to their new $37,180 minimum wage. 

Karen Rogina with the Alaska Hospitality Alliance said that managers may need to pitch in beyond that 40 percent, and that requiring employers to track how employees spend their time is an unwieldy and unreasonable burden. But, she said, that is what it takes to be litigation-proof. 

"Basically it's a ticking bomb for every employer" who doesn't know exactly what percentage of time their employees spend on different tasks, Rogina said. 

In an attempt to clear up labor law, state Rep. Norman Rokeberg, R-Anchorage, has introduced HB 255, which adopts federal overtime exemption definitions. 

The law would make it easier to tell whether an employee is exempt, said Tom Daniel, managing partner at law firm Perkins Coie in Anchorage. 

But federal labor law is woefully out of date in some sections, Carr said. 

Daniel said the biggest difference between state and federal law is that federal law has two tests for whether employees can be exempt from overtime. If they make a minimum salary, they are exempt. If they make less, then the 80/20 or 60/40 rules kick in. 

That minimum salary? $250 per week, or $6.25 an hour -- 90 cents less than Alaska's new minimum wage. 

Federal lawmakers are in the thick of revamping national rules, but the legislation introduced in January has gone nowhere fast. 

"That's why they call labor law 'loose-leaf law,' " Carr said. "It's a very dynamic area. 

"We encourage folks to talk to us. We're an enforcement agency, but my philosophy is that the best enforcement is accomplished through education." 

Investigators are assigned to a phone every day, Carr said, and people can call for free help. 

"They don't have to tell us who they are." 

-----To see more of the Anchorage Daily News, or to subscribe to the newspaper, go to 

(c) 2003, Anchorage Daily News, Alaska. Distributed by Knight Ridder/Tribune Business News. 


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