Meat + Poultry - April 2005 - 51

Labor

Clarifying
overtime
By Richard Alaniz
meat&poultry@sosland.com

ew overtime pay exemptions
under the Fair Labor Standards
Act are in effect. These changes
breathed new life into an outdated, impractical law. In the midst of the Great
Depression, the United States passed
the F.L.S.A., establishing a minimum
wage and overtime pay standards. These
regulations remained largely unchanged
until this past August, when sweeping
changes were enacted.
The two most significant updates included increasing the minimum salary
level necessary for employees to qualify
as exempt from overtime requirements
and updating the "white collar" exemptions. Both of these modifications effectively changed who is exempt from
overtime requirements. Although the
new regulations were enacted months
ago, employers continue to struggle
with real-world applications.
Under the old regulations, each specific overtime exemption had its own
minimum salary requirement. The new
regulations established one standard
minimum salary level of $455 per week
across all exemptions. Accordingly, all
employees earning less than $455 per
week will not be exempt from the act
and are entitled to overtime pay irrespective of their job duties. There are,
however, still some exceptions to the
minimum salary level test. For example,
it does not apply to professionals such
as lawyers, physicians or teachers. Further, no minimum salary requirement
exists for employees under the outside
sales exemption. Finally, computer professionals may be paid an hourly rate of
at least $27.63 as an alternative to the
minimum salary requirement.
Exemption status
The new regulations redefined the
duties an employee must perform to

MEAT&POULTRY

April 2005

meet the "white collar" exemptions.
To qualify for the executive exemption,
the employee must supervise at least
two other employees and have input
on the hiring, firing and promoting of
employees. Regulations now state that
regardless of what the employee does
most often during the workday, it is the
employee's most important duty that is
considered the primary duty.
The administrative exemption can
also exempt an employee from overtime. This exemption applies if the
employee has a primary duty of office
or nonmanual work directly related to
the management or general operation of
the employer
or employer's
customers.
Employees in
this
exempt
category
exercise independent judgment and discretion. To
fall under the professional exemption,
the employee must either have a primary duty to perform duties requiring
advanced knowledge; perform work
requiring invention, imagination and
originality; or talent in a field of artistic
and creative endeavor.
The computer professional exemption covers employees performing
advanced systems analysis and programming work. The new regulations
also updated the outside sales exemption by no longer requiring employees
to spend 80 percent or more of their
time in outside sales. Under the new
regulations, an employee qualifies for
the outside sales exemption if he or she
has a primary duty of outside sales and
customarily performs the job away from
the employer's premises.
The highly compensated employee
exemption is new. Employees earning
$100,000 or more a year will be exempt
from overtime if they receive a salary of at
least $455 per week, their total compensation totals at least $100,000 per year and
they perform office or non-manual work.
They must also customarily perform the
duties of the above executive, administrative or professional employees.

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According to the U.S. Dept. of Labor,
the new regulations have entitled an
additional 1.3 million salaried, whitecollar workers to overtime pay. On the
other hand, the new regulations grant
more freedom to employers in docking an exempt employee's pay for disciplinary reasons or personal time off.
An employer can now deduct from an
employee's pay for absences of one or
more full days if the absence was taken
for personal reasons other than sickness or disability. In addition, employers can now make deductions from an
employee's pay for unpaid disciplinary
suspensions of one or more full days

The new regulations have entitled
an additional 1.3 million salaried,
white-collar workers to overtime pay.
if an employee violates a workplace
conduct rule. The rule must be a written
policy such as a sexual harassment or
discrimination policy that is applicable
to all employees.
Additionally, the new regulations
provide a safe-harbor provision that
makes it much easier for employers to
correct improper deductions from an
exempt employee's pay without incurring substantial overtime liability. This
safe-harbor will minimize the liability
impact that improper deductions can
have on an employer's bottom line.
The practical effect of the new
regulations still remains unclear. At
the very least, employers should make
themselves aware of these changes and
update employee handbooks, policies
and job descriptions to reflect the new
provisions.
Richard Alaniz is a partner in the
Houston law firm of Alaniz and
Schraeder L.L.P. Legal topics provide
general information and not specific
advice.
We would like to hear from you-your comments
and questions about this article are welcome. E-mail
the author at: meat&poultry@sosland.com

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Meat + Poultry - April 2005

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