GENERAL INFORMATION ABOUT RECENT OVERTIME RULE CHANGES (08/23/04)
The United State Department of Labor (DOL) has eliminated the “long test” for determining if an employee is exempt from overtime, and has, instead, made a single test for each of the categories. This means employers will no longer have to determine if an exempt employee is devoting more than 20 percent of his or her time performing non-exempt duties. In addition, the salary limit for these categories has been raised to $455 per week
The Fair Labor Standards Act (FLSA) requires that most employees in the United States be paid at least the federal minimum wage for all hours worked and overtime pay at time and one-half the regular rate of pay for all hours worked over 40 in a work week. However, Section 13(a)(1) of the FLSA provides an exemption from both minimum wage and overtime pay for employees employed as bona fide executive, administrative, professional and outside sales employees. Section 13(a)(1) and Section 13 (a)(17) also exempt certain computer employees. To qualify for exemption, employees generally must meet certain tests regarding their job duties and be paid on a salary basis at not less than $455 per week. Job titles do not determine exempt status. In order for an exemption to apply, an employee's specific job duties and salary must meet all the requirements of the Department of Labor's regulations.
An employee of a public agency who otherwise meets the salary basis requirements of Sec. 541.602 shall not be disqualified from exemption under Sec. Sec. 541.100, 541.200, 541.300 or 541.400 on the basis that such employee is paid according to a pay system established by statute, ordinance or regulation, or by a policy or practice established pursuant to principles of public accountability, under which the employee accrues personal leave and sick leave and which requires the public agency employee's pay to be reduced or such employee to be placed on leave without pay for absences for personal reasons or because of illness or injury of less than one work-day when accrued leave is not used by an employee because:
- Permission for its use has not been sought or has been sought and denied;
- Accrued leave has been exhausted; or
- The employee chooses to use leave without pay.
Deductions from the pay of an employee of a public agency for absences due to a budget-required furlough shall not disqualify the employee from being paid on a salary basis except in the workweek in which the furlough occurs and for which the employee's pay is accordingly reduced.
Misclassifying employees for purposes of complying with federal and State wage-hour laws can be a costly mistake. Employers who mistakenly classify nonexempt employees as exempt can be required to pay fines and back wages due employees. However, an employer can help minimize these risks by establishing procedures governing who is responsible for classifying employees and how classification decisions are made.
While the FLSA includes a wide variety of partial and complete exemptions from its minimum wage and overtime requirements, most employer classification procedures are confined to evaluating an employee's status under the FLSA's so-called white-collar exemptions for executive, professional, and administrative employees.
The FLSA provides minimum standards that may be exceeded, but cannot be waived or reduced. Employers must comply, for example, with any federal, state or municipal laws, regulations or ordinances establishing a higher minimum wage or lower maximum workweek than those established under the FLSA. Similarly, employers may, on their own initiative or under a collective bargaining agreement, provide a higher wage, shorter workweek, or higher overtime premium than provided under the FLSA. While collective bargaining agreements cannot waive or reduce FLSA protections, nothing in the FLSA or the Part 541 regulation relieves employers from their contractual obligations under such bargaining agreements.
The exemptions provided by FLSA Section 13(a)(1) apply only to "white collar" employees who meet the salary and duties tests set forth in the Part 541 regulations. The exemptions do not apply to manual laborers or other "blue collar" workers who perform work involving repetitive operations with their hands, physical skill and energy. FLSA- covered, non-management employees in production, maintenance, construction and similar occupations such as carpenters, electricians, mechanics, plumbers, iron workers, craftsmen, operating engineers, longshoremen, construction workers and labors are entitled to minimum wage and overtime premium pay under FLSA, and are not exempt under the Part 541 regulations no matter how highly paid they might be.
The exemptions also do not apply to police officers, detectives, deputy sheriffs, state troopers, highway patrol officers, investigators, inspectors, correctional officers, parole or probation officers, park rangers, fire fighters, paramedics, emergency medical technicians, ambulance personnel, rescue workers, hazardous materials workers and similar employees, regardless of rank or pay level, who perform work such as preventing, controlling or extinguishing fires of any type; rescuing fire, crime or accident victims; preventing or detecting crimes; conducting investigations or inspections for violations of law; performing surveillance; pursuing, restraining and apprehending suspects; detaining or supervising suspected and convicted criminals, including those on probation or parole; interviewing witnesses; interrogating and fingerprinting suspects; preparing investigative reports; or other similar work.
First responders generally do not qualify as exempt executives because their primary duty is not management. They are not exempt administrative employees because their primary duty is not the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer's customers. Similarly, they are not exempt learned professionals because their primary duty is not the performance of work requiring knowledge of an advanced type in a field of learning customarily acquired by a prolonged course of specialized intellectual instruction. Although some first responders have college degrees, a specialized academic degree is not a standard prerequisite for employment.
Veterans are not exempt administrative, executive or professional employees under Section 13(a)(1) based upon their status as veterans. Military training, for example, generally is not sufficient to meet the requirements for the professional exemption. No amount of military training will satisfy the requirements of the learned professional exemption because the exemption applies only to employees who are in occupations that have attained recognized professional status, which requires that an advanced specialized academic degree is a standard prerequisite for entrance into the profession. No amount of military training can turn a "blue collar" occupation or a technical field into a profession. For example, a veteran who has received substantial military training as a veteran but works on a manufacturing production line or as an engineering technician is not exempt under Section 13(a)(1) from the minimum wage and overtime requirements of the FLSA.
An employee's "primary duty" is critical in determining the exemption, particularly for higher salaried employees. In most cases, the primary duty consumes the majority over 50 percent of the employee's time.
Time is not the only test that needs to be considered in determining an employee's primary duty. If an employee spends less than 50 percent of the time in management, that responsibility could still be the primary duty if other aspects of his or her job support that conclusion. According to the Fifth Circuit, an employee's chief or principal duty is the essence of the test for primary duty; at least under the short test, the primary duty will be the work that is of principal value to the employer, rather than the collateral duties the employee performs. Thus, an employee's primary duty cannot be determined by applying a "clock standard."
FLSA exemptions are subject to the rule of strict construction and are narrowly construed against the employer, which has the burden of proving the exemption. Courts must focus on the actual activities of employees in determining their exempt status under the FLSA, and need not rely on resumes and position descriptions that are vague and do not directly contradict the employees' testimony concerning their day-to-day job activities.