E-Newsletter

April 2003

Salaried Exempt Employees:
The DOL May Revise the Qualifiying Tests for the First Time in Over 25 Years

The U.S. Department of Labor, Wage and Hour Division (Department) has published its long awaited proposal to change the salary and duties tests in order to qualify for overtime exempt status under the federal Fair Labor Standards Act. Although the Department is accepting written comments from the public until 6/26/03 on the newly proposed rules, these changes, or a version of these rules, may become new law as early as this fall.

One major change would raise the minimum required salary from $155 to $425 per week for the executive, administrative and professional exemptions. The Department is also proposing to change the duties tests by adding some new tests, as well as eliminating the "long test" rule of restricting exempt employees from devoting more than 20% (40% in retail and service establishments) of their work time performing non-exempt duties.

Major proposed changes to these duties tests include: 1) Executive exemption: eliminating the "customarily and regularly exercises discretionary powers" language and adding language requiring all executive exempt employees to have the authority to hire or fire other employees; 2) Administrative exemption: eliminating the "customarily and regularly exercises discretion and independent judgment" language and adding language to require an employee to hold a "position of responsibility"; 3) Professional exemption: amending the "requirement" that the employee hold an advanced degree to also allow qualification for the exemption if the individual has a combination of intellectual instruction and work experience if that knowledge is equivalent to a degree; and 4) Outside Sales exemption: removing the 20% rule from the sales employee exemption (exempt outside sales employees must devote no more than 20% of their hours worked to activities that are not incidental to sales.)

What do these changes mean for employers? For more detailed information on the proposed rules on overtime exempt employees, see our April Issue of the Month at www.krukowski.com.