New rules governing overtime rights for white-collar workers which may impact community owners were recently published in the Federal Register. The new regulations, which was a major initiative of the Bush Administration, become effective August 23, 2004.

“The new rule strengthens and guarantees overtime protection for 6.7 million workers,” said U.S. Secretary of Labor Elaine L. Chao. “The current rules, which haven’t been updated since 1949, are so outdated that many workers have to go to court to find out if they are eligible for overtime. The new rule will help workers and reduce the number of lawsuits, so that the millions of dollars wasted on litigation can be better spent on more overtime and creating new jobs.”

The new rules expand the number of workers eligible for overtime by nearly tripling the salary threshold. Under the 50-year-old regulations, only workers earning less than $8,060 annually were guaranteed overtime. Under the new rules, workers earning $23,660 or less are guaranteed overtime. There is no small business exemption and housing allowances do not count toward meeting the salary threshold.

The Fair Labor Standards Act (FLSA) requires that most employees in the United States be paid at least the federal minimum wage for all hours worked and overtime pay at time and one-half the regular rate of pay for all hours worked over 40 hours in a workweek.

However, Section 13(a)(1) of the FLSA provides an exemption from both the Act’s minimum wage and overtime requirements for employees employed as bona fide executive, administrative, professional and outside sales employees. To qualify for exemption, employees generally must meet certain tests regarding their job duties and be paid on a salary basis at not less than $455 per week. Job titles do not determine exempt status. In order for an exemption to apply, an employee’s specific job duties and salary must meet all the requirements of the Department’s regulations.

Executive Exemption

To qualify for the executive employee exemption, all of the following tests must be met:

--The employee must be compensated on a salary basis (as defined in the regulations) at a rate not less than $455 per week;

--The employee’s primary duty must be managing the enterprise, or managing a customarily recognized department or subdivision of the enterprise;

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

--The employee must have the authority to hire or fire other employees, or the employee’s suggestions and recommendations as to the hiring, firing, advancement, promotion or any other change of status of other employees must be given particular weight.

Administrative Exemption

To qualify for the administrative employee exemption, all of the following tests must be met:

--The employee must be compensated on a salary or fee basis (as defined in the regulations) at a rate not less than $455 per week;

--The employee’s primary duty must be 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

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

Professional Exemption

To qualify for the learned professional employee exemption, all of the following tests must be met:

--The employee must be compensated on a salary or fee basis (as defined in the regulations) at a rate not less than $455 per week;

--The employee’s primary duty must be the performance of work requiring advanced knowledge, defined as work which is predominantly intellectual in character and which includes work requiring the consistent exercise of discretion and judgment;

--The advanced knowledge must be in a field of science or learning; and

--The advanced knowledge must be customarily acquired by a prolonged course of specialized intellectual instruction.

Creative Professional Exemption

To qualify for the creative professional employee exemption, all of the following tests must be met:

--The employee must be compensated on a salary or fee basis (as defined in the regulations) at a rate not less than $455 per week;

--The employee’s primary duty must be the performance of work requiring invention, imagination, originality or talent in a recognized field of artistic or creative endeavor.

Computer Employee Exemption

To qualify for the computer employee exemption, the following tests must be met:

--The employee must be compensated either on a salary or fee basis (as defined in the regulations) at a rate not less than $455 per week or, if compensated on an hourly basis, at a rate not less than $27.63 an hour;

--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 duties described below;

--The employee’s primary duty must consist of:
1) The application of systems analysis techniques and procedures, including consulting with users, to determine hardware, software or system functional specifications;
2) The 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;
3) The design, documentation, testing, creation or modification of computer programs related to machine operating systems; or
4) A combination of the aforementioned duties, the performance of which requires the same level of skills.

Outside Sales Exemption

To qualify for the outside sales employee exemption, all of the following tests must be met:

--The employee’s primary duty must be making sales (as defined in the FLSA), or obtaining orders or contracts for services or for the use of facilities for which a consideration will be paid by the client or customer; and

--The employee must be customarily and regularly engaged away from the employer’s place or places of business.

Highly Compensated Employees

Highly compensated employees performing office or non-manual work and paid total annual compensation of $100,000 or more (which must include at least $455 per week paid on a salary or fee basis) are exempt from the FLSA if they customarily and regularly perform at least one of the duties of an exempt executive, administrative or professional employee identified in the standard tests for exemption.

Blue Collar Workers

The exemptions provided by FLSA Section 13(a)(1) apply only to “white collar” employees who meet the salary and duties tests set forth in the Part 541 regulations. The exemptions do not apply to manual laborers or other “blue collar” workers who perform work involving repetitive operations with their hands, physical skill and energy. FLSA-covered, non-management employees in production, maintenance, construction and similar occupations such as carpenters, electricians, mechanics, plumbers, iron workers, craftsmen, operating engineers, longshoremen, construction workers and laborers are entitled to minimum wage and overtime premium pay under the FLSA, and are not exempt under the Part 541 regulations no matter how highly paid they might be.

Where to Obtain Additional Information

For more information regarding the FLSA overtime rules, visit the DOL website by clicking here or call 1-866-4US-WAGE (1-866-487-9243).

When the state laws differ from the federal FLSA, an employer must comply with the standard most protective to employees. Links to your state labor department can be found by clicking here.