Labor Relations and Employment Law
Representing Management Since 1962
April 21, 2004 RE: Federal Overtime Regulations for Exempt Employees On April 20, 2004, the United States Department of Labor announced its final overtime pay regulation revisions for overtime exemptions under the Fair Labor Standards Act. These final regulations cover 536 pages and are expected to be published in the Federal Register either this week or next. These regulations will take effect 120 days from the date of their publication. In the majority of states, including Maine , Massachusetts , New Hampshire , New York and Vermont , these federal definitions likely will apply under state wage and hour law. We are writing to you to alert you as to the most significant issues covered in these revisions. Obviously given their length, we have not had time to fully digest the revisions nor can a notice of this nature cover all of the details. The first major change addresses the “salary level” test. The regulations raise the minimum salary level required for a white collar overtime exemption to $455 per week ($23,660 per year). The current minimum salary level depends upon the nature of the exemption claimed and ranges from $155 per week to $250 per week. Second, the new regulations add a highly compensated employee test which applies to those employees who are paid at least $100,000 per year including base salary, commissions, and non-discretionary bonuses. To qualify as a highly compensated employee, the employee 1) must be paid at least $455 per week in base salary; 2) must perform non-manual work and 3) must customarily and regularly perform one or more exempt job duties required for executive, administrative, professional, computer, or outside sales employees. Third, as in the past, a salaried employee must receive his or her full salary without regard to the quality or quantity of work performed. Thus, the regulations continue to require long standing “no pay docking” rules. However, there are important changes. Full day disciplinary absences may be deducted. This revision is an expansion of the current rule. The regulations also include a safe harbor for employers that make improper deductions from exempt employees’ pay. The safe harbor protects the exemption for “isolated” or “inadvertent” deductions from pay. Finally, the most significant changes in the regulations are in the “job duties” tests for executive, administrative and professional employees. Under the current tests, you may recall that there are various percentages of time allowed for performing non-exempt work while still maintaining the exemption. The new regulations replace the percentage tests with a primary duty test for each white collar classification. The regulations also include many examples applying the various exemptions. An exempt executive employee must have the primary duty of the management of the enterprise or a recognized department or subdivision. The executive must customarily and regularly direct the work of two or more other employees. The executive must have the authority to hire, fire, promote or make other status changes for subordinates or to effectively recommend such decisions. An exempt administrative employee must have the primary duty of performing office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers. He or she must customarily and regularly exercise discretion and independent judgment.
We are available to provide you with information specific to your business. Obviously whether a particular position is exempt or not exempt depends upon a fact specific case-by-case analysis. We do hope however that this generalized overview has been helpful. Sincerely, Peter Bennett |