Law Watch

Overtime Charges

The U.S. Department of Labor has proposed redefining overtime-exempt executive, administrative, professional and outside sales employees under the Fair Labor Standards Act. The proposal will increase the minimum salary needed to $425 per week, if it becomes effective early 2004. It will broaden the exempt duties, adding to those employees who work more than 40 hours per week, but need not receive time and a half.

Executives: The proposal requires exempt executives to have as their primary duty management of all or a recognized subdivision of a business, customarily and regularly direct work of at least two employees, and receive salary. They must also have authority to hire/fire other employees, or their hiring/firing recommendations must have weight. Individuals in sole charge of an establishment must be paid the minimum, but need not meet other requirements. Individuals with 20 percent equity are exempt, regardless of compensation.

Administrative: Under the proposal, exempt administrative employees must have as their primary duty performance of office/nonmanual work “related” to management or general business operations of the employer or its customers. Implementing policies and carrying out major assignments will be sufficient. Holding a “position of responsibility,” not exercising independent judgment and discretion, will be required.

Professional: If the proposal becomes effective, exempt professionals will need to have as their primary duty performing office/nonmanual work, requiring advanced knowledge in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction. They will need either a necessary bachelor’s degree, or equivalent combination of intellectual instruction, work experience or military training. There will be no minimum salary for doctors, lawyers or teachers.

Outside Sales: The proposal continues to require that exempt outside sales employees be customarily and regularly engaged away from the employer’s place of business making sales or obtaining orders or contracts for services or use of facilities. The amount of nonexempt work and the salary paid will no longer be considered.

Salary: Although exempt employees must still be paid on a salary basis under the proposal, this requirement will be more flexible.

State Law: The proposal will not change exemptions under Hawaii law, which exempts any employee paid salary of at least $2,000 per month.

Jeffrey Harris is a partner in the law firm of Torkildson Katz Fonseca Jaffe Morre & Hetherington. He specializes in labor and employment law. He can be reached at 523-5393.

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