Proposed Regulations for White Collar Exemptions - Major Changes In Store

The oldest employment statute, the Fair Labor Standards Act of 1938, has been operated under substantive regulations that have not changed dramatically in the working lives of most current employees. One area of change, the so called white collar exemptions, has not had any substantial substantive re-writing since 1950, and the key dollar amounts, which were originally to be the primary indicator of status have not changed since 1975. Given the basic premise of the wage and hour law, this is a key set of regulations and change has been greatly needed. Under the wage and hour law, the initial presumption is that every employee is entitled to overtime compensation of 1.5 times their regular rate of pay for every hour worked over 40 in a work week. To avoid paying overtime, the employer has the burden of showing that the employee is exempt. By far the most common exemptions are the white collar exemptions for executive, administrative, professional and outside salesmen. The first three are sometimes referred to as EAP. After a few days of news releases and stories about the proposed changes, the actual proposed regulations are here in pdf or text format.


Briefly, the two part test (the long and short form) which had $155 and $250 figures to distinguish between them are now gone. As a practical matter, the long form test had not been utilized in years. There will now be a three tiered system for salaried employees who perform non-manual jobs:

up to $22,100, overtime is mandatory;

from $22,100 to $65,000, new white collar exemption rules will determine eligibility for overtime;

$65,000, no overtime, as long as employee performs one of the exempt duties listed under the executive, administrative or professional regulations.

In addition to the new three tier system and changes in the basic rules for determining whether some one is exempt under one of the regulations, the rules of what constitutes a salaried employee (still a pre-requisite for the EAP exemptions) have changed to ease the danger of losing the exemption on a large of class of employees inadvertently. Employers would also be allowed the right to suspend exempt employees for disciplinary reasons.


It should be stressed these are only proposed regulations and the Department of Labor has identified a number of areas where they specifically invite comments. The comment period runs through June 30th. Given the nature of the regulations and the major changes, there will almost certainly be a large number of comments. It is unlikely that the final regulations, which could possibly have substantial changes from this proposal, would be in effect before 2004 at the very earliest. Over the next few days I will take a look at some of the more specific provisions.

The Blogging Big Time!

Thanks to Howard Bashman's How Appealing mention of Jottings as today's Interesting Law Blog of the Day.

Academician Weighs In On English Only Rules

Judy Olian. Dean of Penn State University's Smeal College of Business and a leading expert on strategic human resources management, advocates more diversity training in an Albuquerque Tribune Online article focusing on several large cases involving English only rules.

Helmsley Gets to Pay More In Attorneys Fees, Than Award

I have previously noted the results of the lawsuit brought by a former employee of a Helmsley hotel, who convinced a jury that he had been discriminated against because he was gay. Now the court has awarded his counsel over $600,000 in attorneys fees. See the Daily news story. Its less than a 1/3 of what the lawyers requested, but more than the actual amount of the reduced verdict to the plaintiff. The second time this week we have reported on cases where the biggest winner was the plaintiff's counsel, not the plaintiff.

More On Wage and Hour Exemption Changes

Updating yesterday's note, the DOL has posted more information on the changes to the regulations on white collar employees, which is one of the principal factors in determining who is entitled to overtime and who is not. In their latest postings are an overview, a comparison of the new test and old test, a pie chart of the demographics of those who will now be eligible for overtime, and the DOL's news release about the changes. The full regulations (about 150 pages) will not published in the Federal Register until Monday. Just from a quick look at the comparison, it does not appear that a couple of issues that employers had hoped would be addressed have been dealt with. One is under the administrative regulation job duty test which appears to maintain the requirement that the job "be related to the management or general business operations of the employer or the employer’s customers." That test has been used by some courts to disallow exemptions because the employers were engaged in "production" type work, rather than business support positions. The other is that the outside sales exemption, still requires that the employee be "customarily and regularly engaged away from the employer’s place or places of business." Employers have long sought an 'inside' sales exemption as well. Although it may be elsewhere in the new regulations, it is not being featured in the material released so far.

Dardinger Case Update - No Challenge to Unusual Ruling on Punitive Damages

Rather than try to get the U.S. Supreme Court to hear the case, Anthem, Inc. has agreed to pay a $30 million dollar judgment that was affirmed by the Ohio Supreme Court. The Indystar has the story. The unusual aspect of the Ohio Supreme Court decision was the court's common law adoption of a split of the punitive damage awards, requiring that a part of it go to a charitable foundation designated by the Court. See the earlier report in Jottings for a link to the decision and why it was unique.

9 Lives for Duffield in the 9th Circuit?

The 9th Circuit had en banc arguments yesterday in EEOC v. Luce, Forward. As noted in Jottings last September, the panel opinion bowed to the weight of the Supreme Court's pro-arbitration decisions and had tried to bring the 9th Circuit into line with every other circuit court, holding that employees could be required to arbitrate Title VII claims as a condition of employment. In February, hearing en banc was granted, reviving Duffield. According to the report at law.com, at least a majority of the en banc panel appears headed to finding its decision in Duffield still lives. If it weren't for the confusion and the cost it causes, having a large segment of the country taking a different path from the rest of the world, would be comical. Of course, if that view should ultimately prevail at the Supreme Court, then rather than comical it would be a story of judicial fortitude and correctness. In today's environment, I know how I would place my wager. But as times and courts change, who knows; for the anti-arbitration forces, keeping the issue alive could prove to be a major victory.