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

2. Fair Labor Standards Act (FLSA)
A Department of Labor Regulation
Compliance is mandatory
Non-compliance exposes the employer to substantial financial risk

3. Immediate Importance
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:
Requiring higher minimum salary
Providing narrower definitions of exempt work
Specifying types of work that must be nonexempt and subject to overtime pay

4. Employee Protection Act
The FLSA is an Employee Protection Act that establishes:
Minimum Wage
Overtime Pay
Record Keeping
Equal Pay
Child Labor Standards

5. Employee Protection Act
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

6. Employee Protection Act
Employees are generally presumed nonexempt and entitled to overtime pay
Exemptions for executive, administrative, professional, outside sales, and computer employees are narrowly construed

7. Exempt Status and the Three Tests (All 3 tests must be met)
Exempt status is determined by the particular duties an employee performs and the way he/she is paid.
Three Tests
Salary basis test
Salary level test
Duties test

8. “Salary Basis” Test
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)

9. Salary Level Test
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

10. Duties Test
Employee must perform the duties specified in one or more of the exemptions
Employees must meet all prongs of the applicable exemption test

11. Executive Exemption Employee must:
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

12. Administrative Exemption
Employee must have primary duty:
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)

13. Academic Administrative Exemption
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”
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)

14. Learned Professional Exemption
Employee’s primary duty must be performance of “work requiring advanced knowledge”
“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

15. Other Professional Exemptions
Creative Professionals must:
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
Have a primary duty of teaching, tutoring, instructing, or lecturing in the activity of imparting knowledge in an educational establishment

16. Computer Exemption Employee must have primary duty of:
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

17. Jobs that Cannot Qualify for Exempt Status
Exemptions do not apply to:
Manual laborers and “blue collar” workers
Public safety employees (with narrow exceptions for certain high-level positions)

18. Impact
Some employees currently classified as exempt may need to be changed to overtime eligible

19. Clearer Guidance on Exemptions
Changes in FLSA Duties Test criteria:
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

20. In Summary… To qualify for exempt status, the new FLSA regulations:
Require a significantly higher minimum weekly salary
Specify narrower definitions of exempt work

21. Employer Responsibilities
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

22. For more information… Check the Department of Labor website: