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 Real Workplace Issues |
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Welcome to the latest
installment
of "Real Workplace Issues," a newsletter dedicated to
providing our clients and friends with practical,
everyday employment law and HR
information. Last month, the medical
diagnostic testing company Quest Diagnostics Inc.
("Quest") agreed to pay 238 employees a total of
$688,772 in overtime back wages due under the
federal Fair Labor Standards Act ("FLSA"). This
settlement resulted after the U.S. Department of
Labor's (DOL) Wage and Hour Division conducted an
investigation and determined that Quest had
misclassified its computer systems workers
as "exempt" from overtime pay. The Quest case illustrates
the complexity of the legal landscape surrounding
overtime eligibility and the significant
penalties/sanctions which can result from
noncompliance. In an effort to educate employers as
to how to avoid similar legal mishaps, this edition of
Real Workplace Issues will be the first of a two-part
series dedicated to examining overtime
compliance.
The 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.
Employees who are eligible for overtime pay under the
FLSA are referred to as "non-exempt."
The FLSA, however, carves out
exemptions for both minimum wage and overtime pay
for certain "white collar" employees. Employees who
fall under these exemptions are referred to
as "exempt" employees (i.e., they are exempt from the
overtime requirements of the FLSA). On August 23,
2004, the revised U.S. DOL regulations went into
effect with the intent of simplifying the determination of
who is exempt from overtime pay under the FLSA.
There are three basic criteria of being exempt from
overtime pay under the FLSA:
As discussed in the previous section, in order for an
employee to be considered exempt (i.e. ineligible for
overtime pay) under the FLSA, the employee must
satisfy the duties test of a specific exemption
as
defined by the revised 2004 U.S. DOL regulations. A
summary of those exemptions is as follows: Computer Employee Exemption: The 2004 revised exemptions included this new definition which applies to employees whose primary duty lies in system design and analysis rather than maintenance.
Executive
Exemption: Under the executive exemption:
Administrative
Exemption: Under the administrative exemption,
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 must include the exercise of
discretion and independent judgment with respect to
matters of significance. This exemption typically
covers employees who are engaged in human
resources, quality control, claims adjusting, financial
services, auditing, tax, etc.
Professional
Exemption: The professional exemption is divided
into two parts:
In addition to the
exemptions above, "highly compensated
employees"
who perform office or non-manual work and are paid a
total compensation of $100,000 per year or more
(which includes 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.
The determination of whether an employee is exempt
from overtime pay under the FLSA is a complex, yet
necessary analysis. Employers often mistakenly
believe that job titles determine exempt status.
Be on the lookout for Part II of our
two-part series
dedicated to examining overtime compliance, which
will review the benefits and components of a
FLSA "compliance review," as well as the
penalties/sanctions for noncompliance.
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