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Amid much furor, the U.S. Department of Labor’s new “Fairpay” overtime regulations took effect on August 23, 2004. Until quite recently it was not certain that the regulations actually would survive, or in what form, but the Congress adjourned earlier this month without acting on legislation threatening to block their implementation. These regulations have become law – at least for now.
The More Things Change . . .
Despite the inflammatory rhetoric on both sides, the changes to the regulation do not appear to threaten the overtime eligibility of large numbers of workers nor to make vast numbers of formerly ineligible workers eligible for overtime. The changes are incremental, not fundamental.
The new regulations offer simplified qualifications for the most commonly used exemptions from the overtime requirements of the Fair Labor Standards Act, the so-called “white collar” exemptions for “executive,” “administrative,” “professional,” and “outside sales” workers. Other significant changes include:
- “Primary duty” test. Each of the “white collar” exemptions depends in large measure on what kind of work the person in the job does. Under the former regulations, in most instances an employee could not be classified exempt unless at least 80 percent of the employee’s job duties were directly and closely related to the “exempt” work. That 80 percent test has been replaced with a requirement that the employee’s “primary duty” consist of “exempt” work. The emphasis now is upon the significance of the duties, not the amount of time consumed (although time spent on various tasks is one factor to be considered).
- New compensation requirements. Under the new regulations, an exempt employee must be paid on a “salary basis” at least $455 per week (about $23,600 per year). Moreover, an employee whose total annual compensation exceeds $100,000 is presumptively exempt – as long as her primary duty is office or non-manual work.
- “Computer employees.” The new regulations clarify and broaden the formerly troublesome “computer professions” exemption.
. . . The More They Remain The Same.
The new regulation offers limited opportunities for employers to reexamine the overtime eligibility for various categories of employees. The fundamental premise of the FLSA regarding overtime, however, still is unchanged: employees are presumed entitled to overtime unless the employer proves otherwise. Whether or not the “Fairpay” regulation survives beyond the November election, employers should continue to be very careful in classifying employees for overtime purposes.
Cook, Little, Rosenblatt & Manson ALERTS are produced periodically as a service of Cook, Little, Rosenblatt & Manson, p.l.l.c. and are intended to highlight emerging legal issues affecting our clients and friends. It is, of course, no substitute for specific legal advice.
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