President Obama's Directions to DOL Include Review of Duties Tests for Overtime Exemptions


Last week’s EmployNews reported a White House announcement that the Department of Labor has been instructed to review changing minimum salary levels for qualification for the executive, administrative and professional overtime exemptions to the Fair Labor Standards Act. The actual instructions to DOL are broader than a review of the salary levels, and could include changes to the duties tests for the various exemptions.

In order to qualify for the exemption, the employer must demonstrate that the salaried employee meets the duties requirements spelled out in FLSA regulations. Most of the speculation about changes to the duties tests involves the executive exemption. Under current regulations, the employee subject to this exemption must have supervision of two or more employees as his or her “primary duty.” However, the rules make clear that primary duty is not solely defined by time spent on such activities. This means that an exempt employee can spend a very small amount of his/her workday on supervision, and the rest of their time on non-exempt work.

This distinction is especially important to retail and restaurant employers with managers and assistant managers who also assist customers, perform custodial functions and otherwise spend time on duties indistinguishable from non-exempt employees. The White House speculated about a change to the executive exemption that would mandate that such employees spend a set period of their working time, such as 50%, on the exempt supervisory duties in order to claim the executive exemption.

Groups representing employers in these industries responded that reclassification of such managers to non-exempt would likely lead employers to reduce hours and wages in order to manage overtime exposure. Any changes to the executive or other exemptions would need to be made through a formal rulemaking.  In addition to the time required to promulgate such rules, changes to the duties test would likely prompt lawsuits challenging DOL’s statutory authority to make basic changes to the exemption requirements. At best, such changes would not become effective until the very end of the President’s current term.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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