written by Michael S. Urban

NEW OVERTIME RULES

Employees may be exempt from the requirement for overtime pay provided that they meet certain criteria established by the United States Department of Labor (DOL).  If an employee is defined as exempt, he or she is not subject to mandatory receipt of overtime pay.  The DOL issued new regulations on April 20, 2004 that redefine who can qualify for exempt status under the Fair Labor Standards Act (FLSA).  The new regulations are effective August 23, 2004. The following is a summary of the new regulations with regard to exempt status from overtime pay. 

Salary Test:  The proposed regulations raise the minimum weekly pay exempt workers must earn, to qualify for exempt status, from $155 to $455. 

The proposed regulations eliminate the “short” and “long” tests for exempt status and replace them with one standard test for each of the categories of exempt employees:  executive, administrative, learned and creative professional, computer, and outside sales.  The proposed standard tests for each category are as follows:

Executive Employees: 

-       The employee primarily manages the enterprise or a recognized        
     department or subdivision, and regularly directs the work of two or more 
     other employees.  

-       The employee must customarily and regularly direct the work of at least  
     two (2) or more other full-time employees or their equivalent. 

-       The employee has the authority to hire or fire other employees (or    
     his/her recommendations as to hiring, firing, promotion or other change 
     of status of other employees are given particular weight).

 Administrative Employees: 

-       The employee’s primary duty is to perform office or non-manual work 
     directly related to the management or general business operations of the 
     employer or the employer’s customers. 

-       The employee’s primary duty includes the exercise of discretion and 
     independent judgment with respect to matters of significance.

Learned Professional Employees: 

-       The employee performs work requiring advanced knowledge, which is 
     work that is predominantly intellectual in character and includes work 
     requiring consistent exercise of discretion and judgment, in a field 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 underlined portion is new.)

Creative Professional Employees: 

-       The standard test requires the employee to perform work requiring 
     invention, imagination, originality or talent in a recognized field of artistic 
     or creative endeavor.  (The addition of the term “originality” is new.)

 Computer Employees: 

-       The salary qualification is $455 per week or not less than $27.63 an hour 
     if compensated on an hourly rate. 

-       The employee must be employed as a computer systems analyst, 
     computer programmer, software engineer or other similarly skilled 
     worker in the computer field performing the primary duties described 
     below. 

-       The standard test requires a primary duty of:  (A) application of systems 
     analysis techniques and procedures, including consulting with users, to 
     determine hardware, software or system functional applications; or (B) 
     design, development, documentation, analysis, creation, testing, or 
     modification of computer systems or programs, including prototypes, 
     based on and related to user or system design specifications; or (C) 
     design, documentation, testing, creation or modification or computer 
     programs related to machine operating systems; or (D) a combination of 
     duties described in (A), (B), and (C), the performance of which requires 
     the same level of skills.  The proposed standard test further requires that 
     the person seeking exempt status be employed as a computer systems 
     analyst, computer programmer, software engineer, or other similarly 
     skilled worker in the computer field.

 Outside Sales Employees: 

-       The standard test does not change that there is no requirement of a    
     minimum weekly salary. 

-       The employee has the primary duty of making sales, or of obtaining 
     orders or contracts for services or for the use of facilities for which a 
     consideration will be paid by the client or customer.

-       The standard test also requires that the employee be customarily and 
     regularly engaged away from the employer’s place or places of 
     business.

Deductions:

-    The regulations allow for a deduction from pay for exempt employees 
     for full day disciplinary absences.  (There is no change to the current 
     prohibition of pay deductions from exempt employees for less than full 
     day absences.

For more information please contact attorneys Michael S. Urban, Dan Silfani or Lisa Fike with the law firm of Amer Cunningham Co., L.P.A by calling 330/762-2411 or by e-mail at murban@amer-law.com; dsilfani@amer-law.com; or lfike@amer-law.com.