On July 9, 2008, New Hampshire enacted "An Act Relative to the Minimum Hourly Rate of Compensation." This new law has significant implications for New Hampshire employers, as it broadens the scope of the state's overtime requirement by eliminating the "motor carrier" exemption to New Hampshire's overtime law for delivery drivers and sales merchandisers. The new law also revises the manner in which employers must calculate the overtime rate of pay for delivery drivers, sales merchandisers, and all employees paid on a salary and commission basis. The Act becomes effective on September 7, 2008.
New Hampshire law generally provides that employees must be paid overtime, at a rate of one and one-half times their regular rate of pay, for all hours worked in excess of 40 hours in any workweek. Traditionally, however, any employee of an employer covered under the provisions of the federal Fair Labor Standards Act (FLSA) has been exempt from New Hampshire's overtime requirement. Thus, employers generally were subject to the overtime requirements of the FLSA or the overtime requirement of New Hampshire law, but not both.
The Act amends New Hampshire law to provide that individuals who are employed as delivery drivers or sales merchandisers, and qualify for the motor carrier exemption under the FLSA are now subject to the New Hampshire overtime requirement. The motor carrier exemption provides an exemption to FLSA overtime requirements for employees with respect to whom the United States Secretary of Transportation has the power to establish qualifications and maximum hours of service pursuant to the Motor Carrier Act of 1935. In practice, this exemption has been interpreted by courts as covering a large number of employees, from long-haul truckers to route sales drivers who never cross state lines.
The elimination of the motor carrier exemption under state law for delivery drivers and sales merchandisers means that, unless such employees qualify for another exemption under New Hampshire law, employers must now pay them overtime. Moreover, New Hampshire's overtime law has relatively few exemptions. For example, although New Hampshire's overtime law has an outside salesperson exemption, unlike the FLSA it does not provide exemptions for executive, administrative, and professional employees. Thus, as a result of the new law, it is possible that even though a delivery driver or sales merchandiser would qualify for the motor carrier exemption under the FLSA, he or she nonetheless may be eligible for overtime under New Hampshire law.
In addition, the Act also contains an entirely new provision that identifies the manner in which employers must calculate the overtime rate of compensation for certain employees. As discussed above, under New Hampshire law, nonexempt employees must be paid overtime at a rate of one and one-half times their "regular rate" of pay for all hours worked in excess of 40 hours in any workweek. The Act provides that the regular rate for "employees paid on a base salary and commission basis," delivery drivers, and sales merchandisers "shall be 1/40 of the employee's weekly remuneration." Read literally, this provision could cause an employee's overtime rate of pay to fluctuate wildly depending on the amount of commission received in any given week. For example, an employee who receives a $5000 commission payment one week would have a far higher regular rate of pay for that week than in a week in which he or she only receives a $200 commission payment. As a result, the employee would be entitled to overtime pay at a much higher rate for work performed in the former week than in the latter week.
In light of the Act, employers should be vigilant in ensuring compliance with New Hampshire's overtime requirements. Employers who employ delivery drivers or sales merchandisers or who pay employees on a base salary and commission basis should consider an audit of wage and hour policies and practices, including their commission plans. It is possible that such an audit will reveal that some delivery drivers or sales merchandisers qualify for the outside salesperson exemption to New Hampshire's overtime law. Those who do not qualify for an exemption under New Hampshire law must be paid overtime. A review of commission plans and the policies and procedures regarding payment of commission also is advisable in light of the new definition of "regular rate" set forth in the Act.
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