• DOL Proposes Changes to Regulations Exempting Employees from Overtime Pay
  • September 19, 2004 | Author: Russell W. Gray
  • Law Firm: Baker, Donelson, Bearman, Caldwell & Berkowitz, PC - Chattanooga Office
  • The U.S. Department of Labor ("DOL") has proposed extensive revisions to its regulations regarding which employees may qualify as exempt from the overtime pay requirements of the Fair Labor Standards Act ("FLSA"). The regulations that the DOL proposes to revise have been in effect basically without change for nearly 50 years.

    The proposed changes relate to, among other things, the exempt status of "white collar" employees, which include executive, administrative, and professional employees, as well as the exempt status of outside salespersons and certain computer employees. With respect to the "white collar" exemption, the DOL has proposed changes to both the salary requirements and duties requirements for that exemption.

    The proposed changes include the following:

    • increasing the minimum salary for exempt "white collar" employees to $425 per week, which equates to $22,100 per year;
    • changing the duties test for exempt executive employees to embody three requirements: (1) managing the enterprise; (2) directing the work of two or more employees; and (3) having authority to hire or fire (or such recommendations are given particular weight);
    • replacing the requirement that administrative employees exercise "discretion and independent judgment" with a new requirement that employees hold a "position of responsibility";
    • recognizing that exempt "learned professionals" may gain equivalent knowledge and skills through a combination of job experience, military training, attending a technical school, or attending a community college;
    • replacing the requirement that outside salespersons devote no more than 20% of their hours worked to activities other than those incidental to and in conjunction with the employee's own outside sales or solicitations with the requirement that the outside salespersons be customarily and regularly engaged away from the employer's place or places of business;
    • eliminating the requirement that exempt computer employees consistently exercise discretion and judgment; and
    • allowing employers to "dock" an employee's salary for disciplinary suspensions of less than one workweek without jeopardizing the employee's exempt status.

    The DOL estimates that the proposed revisions will guarantee overtime pay for 1.3 million more low-wage workers. That increase is expected to result from the increase in the minimum salary for "white collar" exempt employees from $270 per week to $425 per week. According to the DOL, approximately 20% of the current salaried-exempt workforce earns below the new minimum salary of $22,100 per year.

    The DOL is accepting comments from the public on the proposed revised regulations through June 30, 2003. New regulations are expected to be in place by the end of the year.