New Overtime Regulations Issued


New Overtime Regulations Issued

April 20, 2004


The DOL announced today (April 20, 2004) that the new Final Regulations for overtime exemptions have been issued.  Intended to reduce the confusion that has led to an avalanche of class action wage-hour lawsuits in recent years resulting in dozens of multi-million dollar settlements and verdicts, the DOL issued a comprehensive set of new regulations that will overhaul regulations which have not been significantly changed in more than 50 years.  Barring Congressional action, the Final Regulations will take effect August 23, 2004


In response to a wave of concerns, the Final Regulations contain a number of substantive changes from the proposed regulations which were published in March 2003.  Some highlights of the Final Regulations: 


1)  The new minimum salary floor for an employee to be “exempt” will be $23,600/year or $455/week.


2)  A new category of exemption for “highly compensated” employees remains in the new regulations, but the annual salary threshold has been increased significantly from the original proposal of $65,000.   To meet this test an employee will have to be paid $100,000 or more, and  will also have to meet one of the duties tests of the other white collar exemptions.


3)  In response to concerns expressed about the potential loss of overtime pay for “blue collar” workers and others who currently are eligible, the Final Regulations include several new sections that clearly state that manual laborers and  “blue collar” workers, as well as police officers, fire fighters, paramedics, first responders, emergency medical technicians and similar public safety employees (among others) will not be exempt, and will continue to be eligible for overtime pay. 


4)  The Final Regulations contains a new test for the “administrative” exemption that the employee’s primary duty must include “the exercise of discretion and independent judgment with respect to matters of significance,” and  contain detailed guidance and 10 different updated examples applying this new definition.  


5)  The Final Regulations clarify the circumstances in which an employee is exempt as a “learned professional.”  In essence, this exemption is restricted to professions where specialized academic training or certification is a standard prerequisite for hire.  Under this new rule, RNs will generally be exempt, but LPNs will not under this provision.   The regulations recognize that in limited circumstances, employees may be exempt as a “learned professional,” if they attain advanced knowledge in a field of science or learning through a combination of work experience and intellectual instruction. 


6)   Teachers are a separate category under the “professional” exemption, and teachers at all levels, from nursery schools up to institutions of higher learning will be exempt from overtime pay under the rules without having to meet the salary test.


7)  The Final Regulations, while confirming existing law that prohibit “docking” for part of a day, expressly permit disciplinary suspensions without pay of one or more full days for a violation of a company policy, like prohibitions against harassment or workplace violence.   This change will be a welcome clarification for companies that previously had to suspend exempt employees with pay for disciplinary violations.


The Final Regulations are 62 pages long, and there is an additional 277 page preamble that explains the rationale of the DOL for its new rules.  There is still much to learn and analyze in the near future. 


The Labor & Employment team at Gentry Locke is on top of this important development and will keep you further apprised as to the details of the Final Regulations.   For the most up to date information, please contact W. David Paxton (540) 983-9334, or Todd A. Leeson at (540) 983-9437.        


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