Overtime Rule Changes that Apply to Maine Employers

• Maine statutes incorporate by reference the salary requirements under the Fair Labor Standards Act (FLSA).
• The FLSA has “enterprise and individual coverages” to determine whether a business is subject to the law; however, Maine labor laws do not have such thresholds. Any business operating in the state with one employee is automatically covered by state law. This includes all public and private employers regardless of profit or size.
• Maine employers need to review both federal and state labor laws on each particular exemption to determine applicability. Some exemptions are allowed under federal law but our state law prohibits the exemption or does not address it.

As of January 1, 2024, the minimum salary amount is $816.35 per week or $42,450.20 per year. As of January 1, 2025, the threshold will be $43,951 per year or $845.21 per week.

Most employers face making some compensation changes. A plan to meet these challenges should include: conducting an internal analysis of exempt positions, identifying options, and implementing a plan to minimize negative effects on employee relations, direct payroll costs, indirect administrative costs, and general operations. Routinely communicating with employees about what changes are being considered is encouraged.

If they haven’t done so already, employers are strongly advised to conduct their own classification analysis to review those employees for whom they currently claim overtime exemptions and decide whether to:

• Pay time and a half of the employee's regular rate of pay for any overtime work
• Convert to a fluctuating work week method (guaranteed salary with overtime at the half-time rate)
• Raise the employee's salary to at least the new threshold
• Limit the employee's hours to 40 hours or fewer per week
• Some combination of the above

MDOL cannot provide legal guidance on which methodology an employer should use; however, our staff will provide employers with compliance assistance and outreach education to ensure compliance with these new requirements. Employers seeking legal guidance should contact employment compliance advisors.

Please note that the federal salary level and the federal exemption for highly compensated employees are not applicable under Maine law.

Exemption for Executive Employees Under the FLSA (29 CFR, Part 541.3)

• Qualifying Example: An assistant manager in a retail establishment may perform work such as serving customers, cooking food, stocking shelves and cleaning the establishment, but performance of such nonexempt work does not preclude the exemption if the assistant manager's primary duty is management. An assistant manager can supervise employees and serve customers at the same time without losing the exemption. An exempt employee can also simultaneously direct the work of other employees and stock shelves.
• Non-Qualifying Example: A relief supervisor or working supervisor whose primary duty is performing nonexempt work on the production line in a manufacturing plant does not become exempt merely because the nonexempt production line employee occasionally has some responsibility for directing the work of other nonexempt production line employees when, for example, the exempt supervisor is unavailable. Similarly, an employee whose primary duty is to work as an electrician is not an exempt executive even if the employee also directs the work of other employees on the job site, orders parts and materials for the job, and handles requests from the prime contractor. Generally, an employee whose primary duty is ordinary production work or routine, recurrent or repetitive tasks cannot qualify for exemption as an executive.

Exemption for Administrative Employees Under the FLSA (29 CFR, Part 541.2)

• Qualifying Example: Insurance Claims Adjuster; financial employees who collect and analyze info regarding customer income, assets, investments, debts; or an executive assistant or administrative assistant to a business owner or senior executive of a large business generally meet the duties requirements for the administrative exemption if such employee, without specific instructions or prescribed procedures, has been delegated authority regarding matters of significance. Purchasing agents with authority to bind the company on significant purchases, and Human Resources managers who formulate, interpret or implement employment policies and management consultants who study the operations of a business and propose changes in organization generally meet the duties requirements for the administrative exemption.
• Non-Qualifying Example: Personnel clerks who “screen” applicants or individuals performing ordinary inspection work do not qualify for the administrative exemption because the work involves the use of skills and technical abilities in gathering factual information, applying known standards or prescribed procedures, determining which procedure to follow, or determining whether prescribed standards or criteria are met.

Exemption for Professional Employees Under the FLSA (29 CFR, Part 514.3)

• Qualifying Example: An employee's primary duty must be the performance of work requiring advanced knowledge in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction such as those of a teacher, doctor, accountant or lawyer.
• Non-Qualifying Example: While a Certified Public Accountant generally meets the exemption, accounting clerks, bookkeepers and other employees who normally perform a great deal of routine work generally will not qualify as exempt professionals. Paralegals and legal assistants generally do not qualify as exempt professionals because an advanced specialized academic degree is not a standard prerequisite for entry into the field. Although many paralegals possess general four-year advanced degrees, most specialized paralegal programs are two-year Associate Degree programs from a community college or equivalent institution.

MDOL has several Wage and Hour Compliance Assistance classes scheduled all over the state and we are scheduling additional sessions over the next six months. If you are interested in attending a class, would like a class in your area, or have general overtime questions, please email bls.mdol@maine.gov.

Q: What is "overtime"?
A: Unless specifically exempted, employees covered by Maine’s overtime statute must receive pay for hours worked in excess of 40 in a work week at a rate not less than one and one-half their regular rates of pay. This is referred to as "overtime" pay.

Q: What counts as “hours worked” for overtime?
A: Both federal and state law defines the term “employ” to mean “to suffer or permit to work.” Those who are “suffered or permitted” to work must be compensated under the law for the services they perform. Employers who know or who have reason to know that an employee is working beyond the 40-hour work week, must account for those hours and pay requisite overtime if applicable. This includes overtime worked without pre-approval even when it goes against the company policy.

Q: Who is entitled to overtime pay under federal and state labor laws?
A: Most employees covered by the FLSA under federal law and Maine’s overtime statute must be paid at least one and one-half times their regular rate of pay for any hours they work beyond 40 in a workweek. In most cases, an employer who requires an employee to work overtime is generally required to pay the employee premium pay for such overtime work.

Q: Is overtime due after eight hours worked in a day?
A: No (unless the employer has a Collective Bargaining Agreement (CBA) which requires such payment). Overtime is due when an employee works in excess of 40 in a work week, it is not based on hours worked in the day.

Q: In a bi-weekly pay period, is overtime due even when the employee only works 80 hours but worked more than 40 in one week?
A: Yes. An employer may not average a bi-weekly pay period in an effort to avoid the overtime requirement. If an employee works 45 hours during the first week of the pay period and only 35 hours in the second week, the employee is still due five hours of overtime for the excess hours worked in the first work week.

Q: Because federal rules are changing, what employers are covered by the federal Fair Labor Standards Act (FLSA)? Which laws do I comply with as an employer in Maine?
A: The FLSA establishes minimum wage, overtime pay, recordkeeping, and youth employment standards affecting employees in the private sector and in federal, state, and local governments. Covered nonexempt workers are entitled to a minimum wage and overtime pay at a rate not less than one and one-half times the regular rate of pay when an employee works more than 40 hours of work in a work week.

In general, employees of enterprises that have an annual gross volume of sales made or business done of $500,000 or more are covered by the FLSA. In addition, employees of certain businesses are covered by the FLSA regardless of the amount of gross volume of sales or business done. These businesses include: hospitals, businesses providing medical or nursing care for residents, schools (whether operated for profit or not for profit), and public agencies.

*The state enforces similar minimum wage and overtime requirements regardless of the annual dollar volume of a business or industry. Any business in Maine with one employee or more is covered under state regulations.

Q: What happens when federal and state governments have differing overtime laws?
A: The FLSA provides minimum standards, and does not preempt a state from establishing more protective standards. Under state statutes, a salaried-exempt employee who works in a bona fide executive, administrative or professional capacity would receive the protections under the new federal overtime rules because Maine regulations require that the annualized rate established by USDOL under the FLSA will be enforced if that rate is higher than the current established state rate.

Q: What is the difference between overtime and compensatory time? Can I use comp time as a private sector employer in lieu of paying overtime?
A: Both federal and state law provide that most covered employees must receive overtime pay for hours worked over 40 in a work week at a rate not less than one and one-half times their regular rate of pay. The use of compensatory time ("comp time") instead of overtime pay is limited to a public agency that is a state, a political subdivision of a state, or an interstate governmental agency, under specific circumstances. Compensatory time must be provided in the same ratio as overtime pay. Private sector employers cannot satisfy their overtime obligations by providing comp time and must pay overtime-eligible employees an overtime premium for hours over 40 in a workweek.

Any employer, public or private sector, may allow a worker to adjust or flex his or her schedule within the work week so as not to go over 40 hours. For example, a worker who works 10 hours on Monday may be allowed to only work six hours on Friday within the same work week to keep the total hours at or below 40 for that same work week.

Q: Does checking email or taking a phone call after hours count as overtime?
A: Yes. Both federal and state law defines the term “employ” to mean “to suffer or permit to work.” Those who are “suffered or permitted” to work must be compensated under the law for the services they perform. In the event that an employee is working overtime to meet job duties, employers can be held liable for overtime wages. Employers who know or who have reason to know that an employee is working beyond the 40-hour work week must account for those hours and pay requisite overtime.

When it comes to employees answering phone calls or checking email after hours, this is clearly work time and must be recorded and compensated as such. Employers should have clear policies that indicate which employees are allowed to perform work after hours and if employees violate the policy, they should be counseled for the violation of that policy but must still be compensated.

Q: My workers would like to volunteer their extra hours because we are a non-profit. Is that allowed?
A: Under both federal and state law, individuals may not volunteer their services to a for-profit private sector employer. Non-profits are treated differently under the law whereas individuals may volunteer their time, without compensation, for religious, charitable, civic, or humanitarian purposes to non-profit organizations. However, in most cases, employees may not volunteer their time for their non-profit employer.

Q: We own two different businesses and some of our employees work for both. How would this affect how we calculate overtime?
A: Under both federal and state law, when an individual is employed by the same employer and performs work at two or more locations, all hours must be combined within the work week. The employee must be compensated at a rate not less than one and one-half their regular rate of pay for working beyond the 40-hour work week. Maintaining separate payroll records based on location could result in a failure to pay overtime.

Q: I'm paid a salary and my job title is manager. Am I exempt from overtime pay?
A: Job titles do not determine exempt status. The fact that a “white-collar” employee is paid on a salary basis does not alone provide sufficient ground to exempt that employee from the minimum wage and overtime requirements. For an exemption to apply, an employee's specific job duties and salary must meet all of the applicable requirements provided in the Department's regulations.

Q: What are the significant changes to the overtime regulations for “white-collar” salaried workers?
Answers

• A new salary threshold for qualifying executive, administrative and professional exempt employees equaling:  $816.35 per week "$42,450.20 per year as of January 1, 2024. As of January 1, 2025, the threshold will be $43,951 per year or $845.21 per week.

• An automatic increase in the salary threshold every year the minimum wage increases.

Q: What are the white-collar exemptions from overtime?
Answer

• Generally, the white-collar exemptions exclude certain executive, administrative, and professional employees from the minimum wage and overtime requirements.

Q: What determines whether an employee falls within one of the white-collar exemptions?
A: Currently, to qualify for exemption, a white-collar employee must:

• Be salaried, meaning that they are paid a predetermined and fixed salary that is not subject to reduction because of variations in the quality or quantity of work performed (the "salary basis test");
• Be paid at least a specific salary threshold, which is $816.35 per week or "$42,450.20 per year as of January 1, 2024. As of January 1, 2025, the threshold will be $43,951 per year or $845.21 per week. (the "salary level test"); and
• Primarily perform executive, administrative, or professional duties, as provided in the Department's regulations (the "duties test").

*Certain employees are not subject to either the salary basis or salary level tests (for example, doctors, teachers, and lawyers).

Q: How will the Maine Department of Labor automatically update the salary level?
A: The salary level will update annually with each minimum wage increase.

Q: How will employers implement the updated salary level requirement established in this Final Rule?
A: Employers have a range of options for responding to the updated standard salary level. First, employers may increase the salary of an employee who meets the duties test to at least the new salary level to retain his or her exempt status. If an employer chooses not to take that option, for an affected employee newly entitled to overtime pay, employers may:

• pay an overtime premium of one and a half times the employee's regular rate of pay for any overtime hours worked.
• reduce or eliminate overtime hours.
• reduce the amount of pay allocated to base salary (provided that the employee still earns at least the applicable hourly minimum wage) and add pay to account for overtime for hours worked over 40 in the workweek, to hold total weekly pay constant.
• allow a worker to adjust or flex his or her schedule within the work week so as not to go over 40 hours.
• convert to a fluctuating work week method (guaranteed salary with overtime at the half-time rate)
• use some combination of these responses.

The circumstances of each affected employee will likely affect how employers respond to the new salary level requirement. For example, employers may be more likely to give raises to employees who regularly work overtime and earn slightly below the new standard salary level in order to maintain their overtime-exempt status, thereby avoiding the overtime premium. For employees who rarely or almost never work overtime hours, employers may simply choose to pay the overtime premium whenever necessary. Employers should also review their policies to make sure that the policies related to overtime work are clear and consistent with the implementation of the rule changes.

All employers should begin discussing these choices and potential changes with their affected workers. Communicating with employees prior to the change going into effect will make the transition smoother. Some employees may view no longer being a salary exempt worker as a loss of status or as a demotion, even if their pay does not change. Others who will keep their exempt status may believe that they will be expected to pick up additional work that had been performed by others, and feel that they are being taken advantage of by being exempt from overtime. Again, communicating about the changes, setting clear expectations, and establishing clear policies will help both employers and employees navigate these changes.

Q: Are the federal and Maine Department of Labors making any adjustments to the standard duties tests?
A: Neither Department is making any changes to the standard duties test.

Q: Must employees earning below the new level be converted to hourly pay?
A: No. Nothing in the FLSA or state regulations governing the white-collar exemptions requires employers to pay overtime-eligible employees on an hourly basis. Non-exempt employees may be paid on a salary basis—however they must pay the overtime premium for hours worked over 40 in a work week.

Q: Will newly overtime-eligible employees have to record their hours on a daily basis or "punch a time clock"?
A: Overtime-eligible workers are not required to “punch a time clock” physically. Both federal and Maine laws require employers to keep certain records for each nonexempt worker. Employers have options for accounting for workers' hours. There is no particular form or order of records required and employers may choose how to record hours worked for overtime-eligible employees.

For employees with a flexible schedule, an employer does not need to require an employee to sign in each time she or he starts and stops work. The employer must keep an accurate record of the number of daily hours worked by the employee, not the specific start and end times. Thus, an employer could allow an employee to provide simply the total number of hours worked each day, including the number of overtime hours if any, by the end of each pay period.