Volume 38, Issue 8, August 2003
Will New DOL Regulations Mean More Dollars?
by David Barron
The Department of Labor (DOL) recently published a sweeping proposal that will greatly affect the number of American employees entitled to overtime. The proposed changes are likely to go into effect at the beginning of next year, after a period of hearings and comments.
Minimum Salary Level Increased
Perhaps the most radical proposed change to overtime regulations involves an increase in the minimum salary for overtime exemption. Prior to the changes, an employee could be considered exempt from overtime if he performed certain duties, and made a minimum of $155 a week. Now, the DOL proposes to raise the minimum salary threshold to $425 a week. According to the new regulations, an employee must make at least $22,100 per year to be exempt from overtime regulation—a massive change from the previous $8,060 minimum.
Changes to the Duties Test
The DOL also proposed a change to the duties tests that must be met to qualify for three overtime exemptions: executive, administrative and professional. With regard to the executive exemption the proposed changes appear to make it slightly more difficult to qualify for the exemption. Under the current regulations, to qualify for an executive exemption, an employee must have a primary duty of managing an enterprise or division and regularly direct the work of two or more people. Now, in addition, an executive must have the authority to hire and fire other employees (or have their recommendations regarding such decisions be given considerable weight) to qualify for the exemption.
The administrative exemption would be changed to eliminate the need for the employee to exercise “discretion and independent judgment.” Now, the test would only require that the employee hold a “position of responsibility.” While the DOL purports to eliminate confusion, it seems to create more with its vague definition. According to the DOL, a “position of responsibility” is defined as either 1) performing work of substantial importance or 2) performing work requiring a high level of skill or training.
Finally, the professional exemption is to be expanded to allow more employees to qualify. Currently, the regulations provide that an employee must exercise discretion and independent judgment, and also perform work requiring knowledge of an advanced field of science or learning, customarily acquired by a prolonged course of intellectual instruction and study. This has been interpreted as requiring at least a bachelor’s degree. The proposed changes again eliminate the confusing “discretion and independent judgment” requirement, but also recognize that specialized knowledge can be acquired through a combination of job experience, military training, technical school or community college.
In addition to the changes to the existing exemptions, the DOL has proposed to create a new exemption for “Highly Compensated Employees.” This new category would create an exemption for employees earning at least $65,000 per year, perform non-manual labor and perform at least one exempt job function from the administrative, executive or professional category.
Finally, the DOL has proposed changes that drastically expand the limitations on employers’ ability to dock exempt employees’ pay for disciplinary reasons. Currently, an employer is not allowed to dock an exempt employee’s pay for disciplinary reasons for any absence or suspension shorter than a full week. The proposed regulations would allow employers to suspend an exempt employee without pay in full day increments.
Given the major changes and likelihood of the proposed regulations, it would be a good idea to analyze your current workforce to see how it will be affected.
David Barron is an attorney at Alaniz and Schraeder in Houston. He
represents employers in employment-
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