New overtime exemptions take effect

Despite confusion surrounding the new “white collar” exemptions to the Fair Labor Standards Act (FLSA) and recent attempts by several members of the United States Congress to derail their enactment, the new regulations became effective Aug. 23. Issued by the Department of Labor (DOL), the regulations contain new rules for classifying employees as exempt or nonexempt for purposes of federal minimum wage and overtime pay protection. This article provides an overview of the new regulations and discusses the internal process that UST will use to achieve compliance.  

About the new Regulations
The FLSA requires employers to pay nonexempt (hourly) employees at least the federal minimum wage plus overtime pay of one and one-half times the regular rate of  pay for all hours worked over 40 in a work week. There are many exemptions from the minimum wage and overtime requirements often called the “white collar” exemptions, which is a euphemism for “exempt” status. The FLSA exempts from both minimum wage and overtime pay any employee employed in a bona fide executive, administrative or professional capacity and employees the regulations define as “highly compensated.”

In order to qualify as an exempt employee, however, the new regulations require that employees meet three tests – the minimum salary level test, the salary basis test and the job duties test.

Following is an overview of each:

Workers earning less than $455 per week ($23,660 annually) automatically qualify for overtime pay and, according to the new regulations, are nonexempt.

The new standard duties test defines an exempt executive as an employee:

• whose primary duty is managing the “enterprise,” a customarily  recognized department or subdivision;
• who customarily and regularly directs the work of two or more other employees;
• and who has the authority to hire or fire other employees or whose suggestions and recommendations as to the hiring, firing, advancement, promotion, or any other change of status of other employees are given particular weight.

The definition of an exempt administrative employee is one whose primary duty:

• is to perform office or nonmanual work directly related to the management or general business operations of the employer or the employer’s customers; and
• includes the exercise of discretion and independent judgment with respect to matters of significance.

The new standard duties test defines an exempt professional as an employee whose primary duty is the performance of work:

• requiring knowledge of an advanced type in a field of science or learning; and
• the advanced knowledge must be customarily acquired by a prolonged course of specialized intellectual instruction.

There are special rules for highly compensated employees. Employees performing office or nonmanual work who are paid an annual salary of $100,000 or more are exempt if they customarily and regularly perform at least one of the duties of an exempt executive, administrative or professional employee. These employees do not have to meet all the elements of the standard duties test to qualify for the exemption.

There also are special rules for computer employees and employees employed in an administrative capacity for an educational establishment.

Implications of new regulations for UST
These new regulations may affect some UST positions – although many supervisors and managers are currently working with the HR Department to update job profiles on 243 positions. What is important to remember is that a job title alone is insufficient to establish the exempt status of an employee; rather, the employee’s actual job duties and salary determine whether an employee meets the requirements of the new regulations.

During the upcoming weeks, HR partners will contact supervisors and managers for an updated job profile on some positions.

Questions or comments
Complying with these new regulations will present a few challenges for supervisors and managers. Unfortunately, UST’s options are somewhat limited. HR staff ask for your help in order to comply with these new regulations but also to lessen their impact on many of the employees occupying the targeted positions.

Please contact your HR Partner or Edna Comedy if you have questions comments.