Transcript The US Department of Labor’s Fair Labor Standards Act (FLSA)

The US Department of Labor’s
Fair Labor Standards Act
(FLSA)
Fair Labor Standards Act (FLSA)
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A Department of Labor Regulation
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Compliance is mandatory
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Non-compliance exposes the employer to
substantial financial risk
Immediate Importance
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New FLSA regulations have been issued which will
impact many employers
Compliance date = August 23, 2004
The new regulations will make it more difficult to
qualify for exempt status (exempt from the overtime
provisions) by:
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Requiring higher minimum salary
Providing narrower definitions of exempt work
Specifying types of work that must be nonexempt and
subject to overtime pay
Employee Protection Act
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The FLSA is an Employee Protection Act that
establishes:
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Minimum Wage
Overtime Pay
Record Keeping
Equal Pay
Child Labor Standards
Employee Protection Act
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Requires that employees be paid for overtime
hours worked at a rate of 1 ½ times their
regular rate of pay (unless the employee is
exempt from the provision)
Defines overtime as over 40 hours worked in
a work week
Requires significant record keeping for
compliance
Employee Protection Act
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Employees are generally presumed
nonexempt and entitled to overtime pay
Exemptions for executive, administrative,
professional, outside sales, and computer
employees are narrowly construed
Exempt Status and the Three Tests
(All 3 tests must be met)
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Exempt status is determined by the particular
duties an employee performs and the way
he/she is paid.
Three Tests
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Salary basis test
Salary level test
Duties test
“Salary Basis” Test
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Employee must receive a predetermined,
fixed salary that is not subject to reduction
due to variations in quality or quantity of
work performed (except for some very narrow
specified circumstances)
Salary Level Test
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Employee must be paid at least $455 per week
($23,660 annually)
Salary level is not pro-rated for part time
employment
Salary level test does not apply to limited
professions, such as teachers
Duties Test
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Employee must perform the duties specified
in one or more of the exemptions
Employees must meet all prongs of the
applicable exemption test
Executive Exemption
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Employee must:
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Have primary duty of managing the enterprise of
a recognized department or subdivision AND
Direct the work of two or more full-time
employees AND
Either have authority to hire/fire or have his/her
recommendations on hiring, firing, advancement,
promotion, or any other change of status of
employees be given particular weight
Administrative Exemption
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Employee must have primary duty:
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Of performing work “directly related to the management or general
business operations” of the employer AND
That requires employee to exercise “discretion and independent
judgment” with respect to “matters of significance”
“Directly related” includes assisting with running or servicing
of the business (i.e. advisors to management)—not
implementing/performing work such as assisting customers
and implementing processes
“Discretion and independent judgment” includes the power to
make independent choices free from immediate direction
(supervisory and procedural standards)
Academic Administrative Exemption
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Applies to employees who have primary duty of performing
“administrative functions directly related to academic
instruction or training in an educational establishment or a
department or subdivision thereof”
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Includes work related to academic operations and functions (E.g.,
assistants responsible for administering curriculum, instruction
quality/methods, measuring/testing learning potential and achievement of
students, etc.)
Excludes jobs that relate to areas “outside the educational field” (E.g.,
jobs relating to health of students; social workers and psychologists, and
enrollment counselors who engage in general outreach and recruitment
efforts)
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Learned Professional Exemption
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Employee’s primary duty must be performance of
“work requiring advanced knowledge”
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“Advanced knowledge” must be in a field of science or
learning (such as law or medicine) AND must be
customarily acquired by a prolonged course of specialized
intellectual instruction (the academic training must be a
standard prerequisite for the profession)
Predominantly intellectual work that includes consistent
exercise of discretion and judgment
Other Professional Exemptions
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Creative Professionals must:
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Have primary duty of performing work requiring
invention, imagination, originality, or talent in a
recognized field of artistic or creative endeavor
Not be engaged in routine mental, manual, mechanical, or
physical work
Teachers
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Have a primary duty of teaching, tutoring, instructing, or
lecturing in the activity of imparting knowledge in an
educational establishment
Computer Exemption
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Employee must have primary duty of:
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Applying systems analysis techniques and procedures, including
consulting with users to determine hardware, software, or system
functional specifications OR
Designing, developing, documenting, analyzing, creating, testing, or
modifying computer systems or programs, including prototypes,
based on or related to user/system design specifications OR
Designing, documenting, testing, creating, or modifying computer
programs related to machine operating systems OR
Performing a combination of these duties
Can be paid on a salary or fee basis OR at least $27.63 per
hour
Jobs that Cannot Qualify for Exempt
Status
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Exemptions do not apply to:
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Manual laborers and “blue collar” workers
Public safety employees (with narrow exceptions
for certain high-level positions)
Impact
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Some employees currently classified as
exempt may need to be changed to overtime
eligible
Clearer Guidance on Exemptions
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Changes in FLSA Duties Test criteria:
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Working supervisors generally do not qualify under the
Executive Test
Those qualifying under the Executive exemption must
manage a “recognized department” and have authority to
hire/fire or make recommendations of significant weight
to hire, fire, and promote employees
Those qualifying under the Administrative exemption
must, as a primary duty, exercise independent judgment
with respect to matters of significance
In Summary…
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To qualify for exempt status, the new FLSA
regulations:
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Require a significantly higher minimum weekly
salary
Specify narrower definitions of exempt work
Employer Responsibilities
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Determine what positions do not meet FLSA
exemption criteria (Analysis will take place in
early Fall)
Ensure that employees receive fair payment
for services, including overtime pay
For more information…
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Check the Department of Labor website:
http://www.dol.gov/