• Department of Labor Proposes Changes to FLSA Exemptions
  • April 30, 2003
  • Law Firm: Ford & Harrison LLP - Atlanta Office
  • The Department of Labor (DOL) will publish proposed changes to the Fair Labor Standard's Act's (FLSA) overtime exemptions for executive, administrative, professional, and outside sales employees (the "white collar" exemptions) in the March 31 Federal Register.

    Following are some of the highlights of the proposed changes:

    • The proposed changes eliminate the "short" and "long" tests and replace them with one standard test for each of the categories (executive, administrative, professional, and outside sales).

    • The changes raise the minimum weekly pay salaried workers can earn to qualify for the white collar exemptions from $155 to $425.

    • For executive employees, the proposed changes refine the duties test to require authority to hire or fire employees or recommend hiring or firing employees (with recommendations being given particular weight), in addition to the current requirements that the employee manage the enterprise (or a recognized department or subdivision of the enterprise) and regularly direct the work of two or more other employees.

    • For administrative employees, the proposed changes refine the duties test by requiring the employee to hold a position of responsibility with the employer. A position of responsibility is defined as either performing work of substantial importance or performing work requiring a high level of skill or training. The revised rules would retain the requirement that the employee's primary duty must be performing office or non-manual work directly related to the management or general business operations of the employer or the employer's customers. The proposed changes eliminate the requirement that administrative employees not spend more than 20% (40% in retail or service establishments) in activities not directly related to exempt work.

    • For learned professionals, the DOL recommends changing the duties test to require the employee's primary duty be performing office or non-manual work requiring knowledge of an advanced type of science or learning customarily acquired by a prolonged course of specialized intellectual instruction, but which also may be acquired by alternative means such as an equivalent combination of intellectual instruction and work experience. The proposed changes add the proviso that the knowledge can be acquired by an alternative means.

    • For creative professionals, the DOL recommends changing the duties test to include the term originality, so that the primary duties test would require the employee to perform work requiring invention, imagination, originality, or talent in a recognized field of artistic or creative endeavor.

    • For computer employees, the proposed changes permit the employee to qualify if the employee earns $27.63 per hour or $425 per week. The changes adopt the Section 13(a)(17) test as the standard test to determine whether computer employees are considered exempt.

    • The proposed rules do not change the requirement of no minimum weekly salary for outside sales employees. The duties test has been revised to eliminate the requirement that employees not devote more than 20% of the hours worked by nonexempt employees of the employer to activities that are not incidental to and in conjunction with the employee's own outside sales or solicitations. The duties test otherwise is essentially the same; the employee must be customarily and regularly engaged away from the employer's place of business and his or her primary duty must be making sales or obtaining orders or contracts for services or the use of facilities for which the client or customer will pay consideration.

    • The proposed changes would allow deductions from exempt employees' salaries for full-day absences taken for disciplinary reasons. No change is proposed to the prohibition on deductions for partial-day absences for exempt employees.

    The FLSA, which was enacted in 1938, has been revised only minimally over the last fifty years, and many view it as outdated and difficult to apply to the modern workforce. In light of this perception and the recent increase in collective actions raising allegations of widespread misclassification of employees, these proposed changes, or some form of them, may be likely to be enacted. The DOL estimates that the proposed changes could mean that millions more employees will be entitled to overtime pay under the FLSA. See DOL Poised to Unveil Proposal to Change Current Exemptions from FLSA Requirements, Daily Labor Report [BNA], March 27, 2003, p. AA-1. More information on the proposed changes is available on the DOL's web site at http://www.dol.gov.

    We will continue to keep you updated on this issue.