Making change Featured

5:23am EDT July 28, 2003
Last month, Congress backed the United States Department of Labor's proposed rules that will revise the white collar exemptions from minimum wage and overtime pay requirements under the federal Fair Labor Standards Act.

The white collar exemptions are executive, administrative, professional, outside sales and computer employee. To be considered exempt, employees must meet certain minimum tests related to their primary job duties and be paid a salary not less than specified minimum amounts.

The DOL is attempting to bring the regulations up to date with modern business realities. The basic duties tests and the salary basis test have remained essentially unchanged for the last 50 years. The salary levels required for exemption were last updated in 1975.

To qualify for the executive, administrative or professional exemptions under the existing regulations, an employee must earn a minimum salary of $155 per week ($8,060 per year) for the executive and administrative exemptions, and $170 per week ($8,840 a year) for the professional exemption. Employees paid above these minimum levels must meet a long duties test to qualify for the exemption.

The current regulations also provide that employees paid more than $250 per week ($13,000 a year) are exempt if they meet a short duties test. The short tests contain fewer requirements and are less burdensome. Because nearly all salaried employees are paid more than $250 per week, the long duties test has become irrelevant.

Under the DOL proposal, the minimum salary level to qualify for exemption from the FLSA minimum wage and overtime requirements as an executive, administrative or professional employee will be increased to $425 per week ($22,100 a year). Employees who do not meet this minimum level will be non-exempt, regardless of their duties. In addition, the short and long duties tests for each white collar exemption will be replaced by a standard duties test.

The two white collar exemptions that affect the greatest number of employees are the executive and administrative exemptions. To qualify for the executive exemption under the proposed standard duties test, an employee will be required to (1) have a primary duty of managing the enterprise in which the employee is employed or of a customarily recognized department or subdivision thereof; (2) customarily and regularly direct the work of two or more other employees; and (3) have the authority to hire or fire employees or have particular weight given to suggestions and recommendations as to the hiring, firing, advancement, promotion or any other change of status of other employees.

This new standard test consists of the current short test requirements plus a third requirement taken from the current long test.

To qualify for the administrative exemption under the proposed standard duties test, an employee will be required to (1) have a primary duty of performing office or nonmanual work directly related to the management or general business operations of the employer or the employer's customers; and (2) hold a "position of responsibility" with the employer, defined as either performing work of substantial importance or performing work requiring a high level of skill or training.

The standard test will eliminate the requirement under the current short administrative duties test that the work require the exercise of discretion and independent judgment, but replaces that requirement with the position of responsibility requirement.

The proposed rules contain many other changes to the current salary test that, according to the DOL, are designed to create brighter lines and reduce litigation. it is impossible to predict what the final rules may look like. Many of the proposed revisions could be modified or deleted altogether.

The DOL is not expected to finalize the rules until the end of this year or later. Until then, the 50-year old rules still apply. Allen S. Kinzer and Michael F. O'Brien are attorneys with the Columbus office of Vorys, Sater, Seymour and Pease LLP where they practice in the labor and employment law group. Reach them at (614) 464-6400 or www.vssp.com.