New FairPay Regulations Became
Effective on August 23, 2004
The FairPay Regulations went into affect on August 23, 2004, modifying
previous regulations under the Fair Labor Standards Act that define the
exemptions from overtime pay. Under the new FairPay regulations, the minimum
salary level for exemption is increased from $155 per week ($8,060/year) to
$455 per week ($23,600 per year).
Now employees earning less than $455 per week are guaranteed overtime pay
under the FLSA. Employees earning $455 per week or more on a salary basis will
qualify for exemption only if they meet the criteria of one or more of the
revised exemption categories. Some of the exemption categories are described
below:
Executive Exemption
An employee whose primary duty is the management of the enterprise in which the
employee is employed or of a customarily recognized department; and who
customarily and regularly directs the work of two or more other employees; and
who has the authority to hire or fire other employees or whose suggestions and
recommendations as to the hiring, firing, advancement, promotion or any other
change of status of other employees are given particular weight.
Administrative Exemption
An administrative employee is one who meets the increased salary threshold,
whose primary duty is performing office or nonmanual work directly related to
the management or general business operations of the employer or the employer's
customers, and who holds a position of responsibility with the employer. The
primary duties include the exercise of discretion and independent judgment with
respect to matters of significance.
Professional Exemption
An employee who meets the increased salary threshold and whose primary duty is
the performance of work requiring advanced knowledge in a field of science or
learning customarily acquired by a prolonged course of specialized intellectual
instruction; or requiring invention, imagination, originality or talent in a
recognized field of artistic or creative endeavor.
Computer Professionals
A computer professional is one who meets the increased salary threshold, or is
paid on an hourly basis of not less than $27.63 per hour; whose primary duty
consists of the application of systems analysis techniques and procedures,
including consulting with users to determine hardware, software or system
functional specifications; the design, development, documentation, analysis,
creation, or testing or modification of computer systems and programs; or some
combination of such duties.
The new exemption test does not apply to manual laborers or other "blue
collar" workers who perform work involving repetitive operations with
their hands, physical skill and energy. Thus, for example, non-management
production-line employees and non-management employees in maintenance,
construction and similar occupations such as carpenters, electricians,
mechanics, plumbers, iron workers, craftsmen, operating engineers,
longshoremen, construction workers and laborers have been, and will continue to
be entitled to overtime pay. Likewise, police, firefighters, nurses and
emergency medical technicians are specifically excluded from the exemption.
Employees with a total annual compensation of at least $100,000 are deemed
exempt from the FLSA if the employee "customarily and regularly"
performs an identifiable executive, administrative or professional function.
Exempt employees can now be subjected to deductions for disciplinary
suspensions of a day or more imposed in good faith for infractions of workplace
conduct rules.
The new regulations establish a "safe harbor" protection for
employers who subject salaried/exempt employees to improper deductions that are
either isolated or inadvertent and the employer reimburses the affected
employees for the improper deductions. Employers must have a clearly
communicated policy prohibiting improper pay deductions, must include a
mechanism by which employees can complain about improper deductions, and must
make a good faith commitment to comply with the deduction rules going forward.
For more information, and a copy of the new regulations, visit the
Department of Labor's new "FairPay" Web site:
http://www.dol.gov/esa/regs/compliance/whd/fairpay/main.htm
