The Wage and Hour Division of the U.S. Department of Labor recently proposed major revisions to the Fair Labor Standards Act (FLSA). If implemented, it is estimated that eligibility for overtime pay will be:
- Guaranteed for 1.3 million more workers;
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- More certain for an additional 10.7 million workers; and
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- Lost by approximately 640,000 workers.
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This could mean significant changes to your company´s exempt/non-exempt classifications, payroll expenses, and management practices. And because both exempt and non-exempt employees faced with a status change may be resistant, a well-planned communication and change management strategy will be key to a successful transition.
Most notably, the proposal:
- Raises the income threshold for automatic non-exempt status.
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- Consolidates the existing "short" and "long" tests into a set of criteria for each exemption category.
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- Replaces the "less than 20 percent" requirement with a broader "primary duties" provision, thereby eliminating the need to calculate the amount of time an exempt employee spends on non-exempt work.
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- Eliminates the imprecise - and difficult to substantiate - "discretion and independent judgment" requirement.
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- Establishes a new "highly-compensated employees" category with less stringent exemption requirements.
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- Allows "pay-docking" of exempt employees for disciplinary suspensions of one day or more.
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Below are some specifics, broken down by salary range:
Less than $22,100 per year - Non-exempt (eligible for overtime), regardless of duties
Between $22,100 - $65,000 per year - Exempt (ineligible for overtime) if they fall into one of the following categories:
- Executive employees - (1) Have a primary duty of managing the enterprise or a recognized department or subdivision, (2) regularly direct the work of two or more employees, and (3) have the authority to hire or fire other employees or have particular weight given to their suggestions with respect to hiring, firing, promotions, or other status changes.
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- Administrative employees - (1) Have a primary duty of performing non-manual work related to the management or general business of the employer or the employer´s customers, and (2) hold a "position of responsibility" in which the work is either of substantial importance or requires a high level of skill or training.
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- Learned Professional Employees - Have a primary duty of performing non-manual work requiring knowledge of an advanced type of science or learning. The acquisition of this knowledge is no longer assumed to be the result of a traditional college curriculum; rather, alternative means such as technical training, on-the-job experience, etc. are also recognized sources of such expertise.
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$65,000 per year or more - Automatically exempt (ineligible for overtime) if they perform even just one of the duties described above.
Specific changes relating to creative professionals, computer employees, and outside sales employees have also been proposed.
For more information please see:
- The Department of Labor´s website for a side-by-side comparison of the current vs. proposed regulations.
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- "An Economic Primer to White Collar Reform," published by the Employment Policy Foundation, for an interesting analysis of labor market changes since the FLSA was adopted in 1938, as well as a simplified version of the DOL´s side-by-side comparison.
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Take a moment to review the proposed changes, determine the impact they will have on your organization, and forward your comments to:
Tammy D McCutchin, Administrator
Wage and Hour Division
Employment Standards Administration
U.S. Department of Labor
Room D-3502
200 Constitution Avenue, NW
Washington, D.C. 20210
Fax: 202-693-1432
Email: whd-reg@fenix2dol-esa.gov
Beth Casey, PHR Director of Human Resources, Advantage Human Resourcing ®, a leading provider of professional and support-level Talent. For more information contact Beth at bcasey@advhr.com or 1-800-WORKING or visit www.advhr.com.
Copyright © 2003 by Advantage Human Resourcing ®
