Restoring Overtime Pay for Working Americans Act: Senate Democrats Join President Obama’s War On FLSA Exemptions

by BakerHostetler

Yesterday, Senate Democrats introduced a bill cited as the “Restoring Overtime Pay for Working Americans Act” (“the Act”), which would amend the Fair Labor Standards Act (“FLSA”) to make it more difficult for employers to classify employees as exempt and impose penalties on employers for failing to comply with the FLSA’s record-keeping provisions. This action by the Senate Democrats provides a second front to the war on exemptions declared by President Obama in March, when the White House directed the U.S. Department of Labor (“DOL”) to “modernize and streamline the existing overtime regulations” as they pertain to the application of exemptions, which we reported here.

The Act proposes the following:

(1) Increased Salary Basis.

For executive, administrative, and professional exempt employees, the weekly salary would increase from $455 to $1,090 over a 3-year period.  Specifically, the weekly salary would increase to $665 (1 year following enactment), $865 (2 years following enactment), and $1,090 (3 years following enactment). At 4 years after enactment, and every succeeding year, the weekly salary would increase by the annual percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers.

For highly compensated exempt employees, the annual compensation would increase from $100,000 to $125,000 over a 3-year period. Specifically, the compensation would increase to $108,000 (1 year following enactment), $116,000 (2 years following enactment), and $125,000 (3 years following enactment). At 4 years after enactment, and every succeeding year, the weekly salary would increase by the annual percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers.

(2) Cannot Spend More Than 50% of Work Hours on Duties That Are Not Exempt.

For executive, administrative, and professional exempt employees, the Act would require that an employee “shall not spend more than 50% of such employee’s work hours in a workweek on duties that are not exempt....”

If the Act becomes law, it will be interesting to see whether it has any meaningful impact on the application of exemptions to employees who contemporaneously perform exempt duties while spending time on activities that are not exempt. For instance, Courts have long recognized that exempt employees, such as store managers and restaurant managers, may properly be classified as exempt regardless of the time spent on duties that were not exempt. The “primary duty does not mean the most time-consuming duty; it instead connotes the ‘principal’ or ‘chief’ – meaning the most important duty performed by the employee.” Thomas v. Speedway SuperAmerica, LLC, 506 F.3d 496, 504 (6th Cir. 2007).  Indeed, the current federal regulations provide that “assistant managers in a retail establishment who perform exempt executive work such as supervising and directing the work of other employees, ordering merchandise, managing the budget and authorizing payment of bills may have management as their primary duty even if the assistant managers spend more than 50 percent of the time performing nonexempt work such as running the cash register.” 29 C.F.R. § 541.700(c). Accordingly, the FLSA, “recognizing the nature of retail business, exempts retail executives from the requirement that the majority of their hours be spent on executive functions.” In re Family Dollar FLSA Litigation, 637 F.3d 508, 515 (4th Cir. 2011) (holding that retail store manager was exempt executive where the plaintiff “spent 99%” of her time doing non-exempt duties such as “putting out freight, running a cash register, doing schematics and doing the janitorial work” because “during 100% of the time, even while doing those jobs, she was also the person responsible for running the store.”); Murray v. Stuckey’s Inc., 939 F.2d 614, 618 (8th Cir. 1991) (explaining that the fact the retail store managers spend up to 90% of their time on non-managerial duties “is not a controlling factor under the regulations”); Jackson v. Advance Auto Parts, Inc., 362 F.Supp.2d 1323, 1334 (N.D. Ga. 2005) (holding that retail store assistant managers were exempt executives where the plaintiffs “spent 90% of their time performing non-exempt tasks, including selling, operating the register and cleaning the store.”). To that end, “[a] number of federal courts have disregarded the time factor... where the manager is in charge of a separate facility such as a convenience store or restaurant chain.” Haines v. Southern Retailers, Inc., 939 F.Supp. 441, 449 (E.D. Va. 1996). See also, e.g., Meyer v. Worsley Co., Inc., 881 F.Supp. 1014, 1020 (E.D. N.C. 1994).

(3) Penalties For Failure To Maintain Records.

Though the FLSA currently provides that an employer who “repeatedly or willfully” fails to pay minimum or overtime wages “shall be subject to a civil penalty not to exceed $1,100 for each such violation,” the Act would also subject an employer to such penalties if it repeatedly or willfully fails to “make, keep, and preserve” records relating to wages. Under the FLSA, and the federal regulations promulgated thereunder (29 C.F.R. § 516.2), every employer shall maintain and preserve payroll or other records containing the following information and data:

  • Name in full, as used for Social Security recordkeeping purposes, and on the same record, the employee’s identifying symbol or number if such is used in place of name on any time, work, or payroll records
  • Home address, including zip code
  • Date of birth, if under 19
  • Sex and occupation in which employed
  • Time of day and day of week on which the employee’s workweek begins
  • Regular hourly rate of pay for any workweek in which overtime compensation is due
  • Basis of pay by indicating the monetary amount paid on a per hour, per day, per week, per piece, commission on sales, or other basis
  • Amount and nature of each payment which is excluded from the regular rate
  • Hours worked each workday and total hours worked each workweek
  • Total daily or weekly straight-time earnings or wages due for hours worked during the workday or workweek, exclusive of premium overtime compensation
  • Total premium pay for overtime hours
  • Total additions to or deductions from wages paid each pay period including employee purchase orders or wage assignments
  • Individual employee records reflecting the dates, amounts, and nature of the items which make up the total additions and deductions
  • Total wages paid each pay period
  • Date of payment and the pay period covered by payment
  • Records of retroactive payment of wages
  • Employees working on fixed schedules

Moreover, with few exceptions, such information must be kept for “at least 3 years.” 29 C.F.R. § 516.5.

Though passage of the Act is far from a certainty, and the DOL has yet to propose new rules for consideration, employers should note the proposed restrictions on exempt classifications and take proactive steps to prepare for the challenges that may lie ahead.


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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