News

ST. LOUIS, MO – On April 20, 2004 , the Department of Labor (DOL) released the final version of the much anticipated and controversial FLSA regulations governing overtime eligibility for "white-collar" workers. The regulations went into effect August 23, 2004 .

The “Fair Pay” regulations update and streamline the “salary” and “duties” tests. These tests are used to determine if employees are exempt from federal overtime requirements. In recent years, the old vague regulations caused employer misclassifications of employees as “exempt” from overtime pay, triggering employer liability for back pay, plus penalties, and a growing number of class action lawsuits.

White-collar employees still must: (1) be compensated above the specified minimum salary level; (2) be paid on a salary basis; and (3) conform to certain primary “job duties” involving executive, administrative or professional skills. However, the new regulations have dramatically changed the compensation levels to reflect the current state of the economy. In addition, the new regulations clarify many of the terms which had caused employers to misclassify employees.

Some of the key changes include:

• Executive exempt employees are now required to hire and fire employees or at least their input in such decisions must be given particular weight;
  
• Administrative exempt employees need to continue displaying discretion and independent judgment, but the independent judgment must be related to matters of significance;
  
• Creating two separate tests, learned and creative, for employees classified as professionally exempt;
  
• Outside sales personnel no longer need to meet the 80/20 test;
  
• New highly compensated employee rule;
  
• Clarification on when an employer may properly deduct pay from a salaried employee; and
  
• New “safe harbor” for correcting overtime and minimum wage errors.

Employers need to review current job classifications to see what, if any adjustments need to be made in regards to those employees currently classified as exempt. Additionally, employers in some cases may be able to reclassify hourly employees as salaried and save paying overtime.