Labor and Employment E-News
Electronic Volume 3, Issue 1 4/27/2004
U.S. DEPARTMENT OF LABOR
UPDATES OVERTIME REGULATIONS
On April 20, 2004, the Department of Labor ("DOL") announced its
final regulations governing overtime pay, changing the tests for the
"white-collar" exemptions under the Fair Labor Standards Act. Thousands of
businesses likely will be impacted by the changes. The new regulations
will be effective 120 days after they are published in the Federal
Register (publication is expected by the end of this week).
Highlights of the new regulations include:
- Salary level for employees to meet the "white-collar" exemptions
increased to $455 per week.
- One "standard" test for each exemption now applies. "Long" and
"short" duties tests abolished.
- Special rule for exemption of "highly-compensated" workers paid an
annual compensation of $100,000 or more.
- Employers with a written policy prohibiting improper pay deductions
will not lose exempt status for inadvertent deductions.
- Executive exemption is narrowed by new "standard" test.
- Exemption for computer employees clarified.
The following chart illustrates the comparison of overtime pay
eligibility at particular salary levels under the existing regulations vs.
the new regulations:
Comparison of Salary Levels
|
Earnings |
Existing Regulations |
New Regulations |
|
Less than $155/week |
Guaranteed Overtime |
Guaranteed Overtime |
|
$155 to $249.99/week |
Long Duties Test |
Guaranteed Overtime |
|
$250 to $454.99/week |
Short Duties Test |
Guaranteed Overtime |
|
$455/week to $100,000/year |
Short Duties Test |
Standard Duties Test |
|
$100,000/year or more |
Short Duties Test |
Highly Compensated Test |
The following charts illustrate the changes between the current
rules governing the "white-collar" exemptions and the new rules:
Comparing the Duties Test for Executive Employees
| |
Current Short Test |
New Standard Test |
|
Salary Level |
$250 per week |
$455 per week |
|
Duties |
Whose primary duty consists of the management of the enterprise
in which he or she is employed or of a customarily recognized
department or subdivision thereof; and
Who customarily and regularly directs the work of two or more
other employees. |
Whose primary duty is management of the enterprise in which the
employee is employed or of a customarily recognized department or
subdivision thereof;
Who customarily and regularly directs the work of two or more
other employees; and
Who has the authority to hire or fire other employees or whose
suggestions and recommendations as to the hiring, firing,
advancement, promotion or any other change of status of other
employees are given particular weight. |
Comparing
the Duties Test for Administrative Employees
| |
Current Short Test |
New Standard Test |
|
Salary Level |
$250 per week |
$455 per week |
|
Duties |
Whose primary duty consists of the performance of office or
non-manual work directly related to management policies or general
business operations of his employer or his employer's customers;
and
Which includes work requiring the exercise of discretion and
independent judgment. |
Whose primary duty is 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; and
Whose primary duty includes the exercise of discretion and
independent judgment with respect to matters of
significance. |
Comparing
the Duties Test for Professional Employees
| |
Current Short Test |
New Standard Test |
|
Salary Level |
$250 per week |
$455 per week |
|
Duties |
Whose primary duty consists of the performance of work requiring
knowledge of an advanced type in a field of science or learning
customarily acquired by a prolonged course of specialized
intellectual instruction and study; and
Which includes work requiring the consistent exercise of
discretion and judgment; or
Whose primary duty consists of the performance of work requiring
invention, imagination or talent in a recognized field of artistic
endeavor. |
Whose primary duty is the performance of work requiring knowledge
of an advanced type (defined as work which is predominantly
intellectual in character and which includes work requiring the
consistent exercise of discretion and judgment) in a field of
science or learning customarily acquired by a prolonged course of
specialized intellectual instruction; or
Whose primary duty is the performance of work requiring
invention, imagination, originality or talent in a recognized field
of artistic or creative endeavor. |
These changes may impact the pay practices of thousands of
employers. Employers should immediately review the pay status
of their employees and prepare to implement changes in their pay
practices within the next four months. Additional information regarding
the new regulations may be accessed on the DOL's website at www.dol.gov/fairpay.
Please feel free to contact a member of Reinhart's Labor and
Employment Department if you have any questions about the impact of these
new regulations on your workforce, or if you would like our assistance in
auditing your overtime pay practices to ensure compliance with the new
regulations. Labor &
Employment E-Newsletter is an electronic publication of the law firm
of Reinhart Boerner Van Deuren s.c and is prepared by attorneys in its
Labor & Employment Department. This publication is intended to afford
timely notice to our clients and friends of current events in labor and
employment and to provide general information about labor and employment
issues. It is not intended, nor should it be used, as a substitute for
specific legal advice regarding particular factual situations.
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