NEW WAGE & HOUR RULES - ALMOST A BIG NOTHING

On April 23, the Department of Labor (DOL) released the long awaited updates to the wage and hours regulations. Employers have until August 23, 2004 to be in compliance.

The biggest change is that the minimum salary an exempt or salaried employee must make to be considered exempt will be $23,660 or $455 per week. This means that any person on your payroll who is considered an exempt employee and is making less than this amount must either become a non-exempt employee or receive a salary increase to at least $23,660 per year. What this does NOT mean is all employees making $23,660 or more now automatically qualify as exempt employees. Employees making more than the minimum salary must still qualify under the executive, professional, administrative or outside sales exemptions.

To qualify for an executive exemption, the employee must direct the work activities of two or more people and have the authority to hire and fire or to recommend that employees be hired or fired. In reviewing the exempt status of executive employees, this factor will be given “particular weight”. No one is really sure what this means.

The DOL has stated that there is no significant difference between the old regulations and the new regulations on what qualified as a professional exemption.

As for the administrative, computer professional and outside sales exemptions, there are very few changes from the previous standards. However, one change that could become significant is the DOL changed the requirement that exempt employees spend no more than 20% of their time performing non-exempt work. Instead, the new regulations focus on the “primary duties” of the employee to qualify as exempt. This is another area that will be open to interpretation and the standards are still not clear.

Deductions from pay of exempt employees has been clarified somewhat. Employers will now be allowed to impose disciplinary unpaid suspension of a minimum of one full day for serious conduct violations such as harassment, drug use or safety infractions.

Take a very conservative approach to your workforce. A great majority of the wage and hour class action lawsuits involve the definition of exempt status. This is a great opportunity to re-classify your employees correctly. With all of the media attention on this issue, employees and plaintiff attorneys are studying these new regulations closely. One of the objectives of the new regulations is to cut down on the number of lawsuits filed and the multi-million dollar settlements as a result of wage and hour violations. These changes may have the opposite effect – especially at the beginning of the implementation stage.

Here’s an example of what not to do. Recently, a technician for a company was changed from non-exempt status to exempt status because the management of the company thought he was making too much overtime. The new rules are clear, a technician is a non-exempt employee. The fact that the employee is working too many hours has no bearing on their status as an exempt or non-exempt employee.

Follow this rule of thumb – “When in doubt make, it non-exempt”.