EMPLOYMENT LAW
Overhaul of FLSA "White Collar" Exemptions
Requires Review of Employee Exempt Status
July 2004
By Anne
G. Scheer*
As it currently stands the U.S. Department of Labor’s (“DOL”)
overhaul of its regulations for the “White Collar”
exemptions to the Fair Labor Standard Act’s (“FLSA”)
minimum wage and overtime requirements is scheduled
to take effect on Monday, August 23,
2004. While there is always a possibility that Congress
will block implementation of some or all of the DOL’s
revamped regulations before August 23 it is looking
more and more likely that the regulations will go into
effect as drafted on August 23.
As a result employers should now be reviewing positions
exempt under the current “white collar”
exemptions and determining whether such position will
continue to be exempt once the new regulations become
effective. If not the employer needs to consider whether
it wants to/can make any changes to the salary or job
duties of the position such that it will continue to
qualify as exempt, or change the position to non-exempt.
In addition, employers can consider whether they have
any positions currently classified as non-exempt that
may qualify as exempt under the new regulations, and
if so whether or not the employer wants to make that
change. It should be noted that while an employer cannot
classify a non-exempt position as exempt, it can classify
exempt positions as non-exempt and pay overtime if it
so chooses.
The Highlights
In a nutshell the new regulations for the executive
and administrative exemptions increase
the minimum weekly salary/fee that must be paid for
the position to qualify under these exemptions to $455
per week, and increased the duties test the individual
must perform in order to qualify. The changes to the
duties tests of each of these exemptions are a bit subtle
in that the new regulations have basically merged the
current long and short duties tests of each of these
exemptions into one long test for each.
The Executive Exemption
In order to qualify for the executive
exemption under the new regulations the employee must:
1. Be compensated on a salary basis of at least $455 per week;
2. Have as their primary duty managing the business or a customarily recognized department or subdivision thereof;
3. Customarily and regularly direct the work of at least two or more other full-time employees or their equivalent; and
4. Have the authority to hire or fire other employees or whose recommendations as to hiring, firing, advancement, promotion or other change of status must be given particular weight.
The Adminstrative Exemption
In order to qualify for the administrative
exemption under the DOL’s new regulations an individual
must:
1. Be compensated on a salary or fee basis of at least $455 per week;
2. Have as their primary duty performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers; and
3. In performing their primary duties exercise discretion and independent judgment with respect to matters of significance.
The Highly Compensated Employee
Exemption
Finally, in order to qualify as exempt as a highly
compensated employee an individual must be:
1. Paid total annual compensation of at least $100,000, which must include at least $455 per week on a salary or fee basis; and
2. Meet at least one of the duties tests of the Executive, Administrative
or Learned Professional employee exemptions.
For more information
The DOL has developed an extensive
web site attempting to answer many questions related
to the new “white collar” regulations. The
site includes fact sheets on specific jobs, an online
training seminar and answers to commonly asked questions.
You may contact Anne G. Scheer at 800.528.1181.
*Anne G. Scheer is admitted to practice in New Hampshire.
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