by Jackson Lewis

New Amendments to the overtime exemptions for "white collar" employees under the Fair Labor Standards Act are expected to be published by the Department of Labor by the end of March 2004. The proposed revisions to the 50-year old regulations survived a strenuous round of Congressional stonewalling before the U. S. Senate voted to approve the omnibus spending bill without a rider that would have blocked funding for any overtime rule changes. Despite likely additional changes to the amendments as proposed in March 2003, the Employment Standards Administration, Wage and Hour Division, is poised to release the final regulations simplifying the criteria for determining when employees are exempt from overtime pay under the FLSA.

Opponents of Amendments

Opponents of the amendments claim they will eliminate overtime for millions of individuals by reclassifying them as exempt workers. In contrast, the Department of Labor projections tend to show that many workers will become eligible for overtime pay for the first time.

Among the most hotly contested provisions of the Labor overtime regulations is a change in the so-called "duties test" that is used to determine whether a salaried employee is an executive, professional, or administrative employee exempt from overtime pay. The proposal also increases the wage level below which any employee is entitled to overtime regardless of the nature of the job duties. Additionally, the proposed regulations would permit partial week suspensions of exempt employees who violate serious work rules (such as sexual harassment) and would expand the window of corrections during which time an employer could correct certain infrequent and inadvertent improper deductions and avoid class action liability.

Congressional opponents have said they are prepared to launch legislative initiatives that, if successful, would block any funding for the new regulations. This is essentially the same strategy that failed in the prior congressional session. Another plan being considered involves the Congressional Review Act, which establishes a procedure to rescind agency regulations. The CRA was used successfully by Republicans in 2001 to rescind the final ergonomics standard promulgated by the Administration.

Final Regulations May Include More Changes

Changes to the revised regulations are likely before they are finalized. As revealed during the comment phase of the regulatory process, there are several areas that may be particularly vulnerable. First, the "salary test," meaning proposed the minimum level below which an employee would be entitled to overtime pay regardless of job duties, may be subject to upward adjustment. The proposed regulations increase the floor from $155 per week to $425 per week. A higher minimum salary may be proposed.

Secondly, the so-called "super salary test" newly proposed in the regulations may be eliminated. This test, which sets a prescribed formula for highly compensated individuals who would be exempt even though a necessarily supervisory, professional or administrative, has been criticized for its relative indifference to the actual duties performed by the employee. Having generated literally thousands of comments and months of public debate, the proposed regulations are certain to be controversial no matter what course the Wage and Hour Administration finally takes.

Another open question is when will the final changes become effective. The DOL could make the amendments effectively immediately or delay the effective date for 60 or 90 days. Presumably the DOL will give the employer community a period of time in which to analyze the new requirements and ramp up their compliance efforts.