|Applying The New Overtime Regulations To
BY JIM BARBER, CP
The U. S. Department of Labor (DOL) on March 28, 2003, released proposed
rule changes to the Fair Labor Standards Act of 1938 (FLSA) for public
During this time period the Air Line Pilots Association (ALPA) and
the Allied Pilots Association (APA), in separate but distinct APA’s
comments, outlined their respective positions opposing any change
in the department’s August 4, 2000, Administrative Review Board
ruling on the non-exempt status of pilots, under the Service Contract
Act. ALPA and APA’s official comments were submitted to
DOL, on June 27, 2003.
Despite fierce political controversy, accompanied by a vigorous debate
in the U.S. Congress and the media on April 20, 2004, the DOL announced
its final regulations governing overtime eligibility for “white
collar” workers pursuant to the FLSA. The DOL also unveiled
a new website, titled “FairPay” (found at www.dol.gov/esa/regs/compliance/whd/fairpay/main.htm),
to help explain the changes. The full text of the regulations
was published on April 23, 2004 in the Federal Register. A complete
copy of those regulations may be found at http://www.access.gpo.gov/su_docs/fedreg/a040423c.html
under the Wage and Hour Division.
Under the new regulations the FLSA’s “white collar”
exemption rule increases the salary floor under which employees must
be paid overtime. Those earning $455 per week (the equivalent
of $23,660 per year) or less are now automatically entitled to time-and-a-half
pay for any hours worked over 40 hours per week.
In addition, Section 541.601 in the final regulations states:
“An employee with total annual compensation of at least
$100,000 is deemed exempt under section 13(a)(1) of the Act if the
employee customarily and regularly performs any one or more of the
exempt duties or responsibilities of an executive, administrative
or professional employee identified in subparts B, C or D of this
Therefore, highly compensated employees such as pilots, who earn
at least $100,000, may be exempt and not entitled to overtime
DUTIES TEST - DISCRETION AND INDEPENDENT
One controversial area in the old exemption regulations was the “duties
test.” In the new rules the “duties test”
is simplified and the so-called “long tests” for lower
paid employees have been deleted. This leaves one standard test
for each category of exemption. Historically, these test provisions
have proven to be the catalyst for most FLSA litigation.
The “discretion and independent judgment” requirement
for administrative exemption was retained. The confusion and
discussion concerning the boundaries of that requirement will likely
CONFUSION & CONFLICTING COURT RULINGS
Confusion also existed under prior regulations as to how pilots should
be classified. The DOL, in an opinion letter dated, January
20, 1975, under the former regulations determined that helicopter
pilots, are non-exempt and are entitled to overtime pay.
Similarly the court in Ragnone v. Belo Corp., 131 F. Supp.
2d 1189, (D. Ore. 2001), applying the former regulations, found a
helicopter pilot was not exempt and, therefore entitled to
overtime pay. However, earlier this year in Kitty Hawk Air
Cargo, Inc. v. Chao, 304 F.Supp.2d 897, (N.D. Tex. 2004) (Service
Contract Act case), the court applied the old regulations and found
Kitty Hawk’s pilots to be exempt and not entitled to
overtime pay. Previously the court in Paul v. Petroleum
Equipment Tools Co., 708 F.2d 168 (5th Cir. 1983), also applying
the former regulations, found a company airplane pilot to be exempt
under the learned professional exemption and not entitled to
overtime pay. Confused yet?
In the face of the conflicting court rulings and the lack of record
evidence on the standard education requirements for various pilots,
the DOL did not modify its position concerning pilots in the final
regulations. In its preamble to the final regulations the DOL
“Most pilots are exempt from the
FLSA overtime requirements under section 13(b)(3) of the Act, which
exempts “any employee of a carrier by air subject to the provisions
of title II of the Railway Labor Act.” Thus, pilots who
are employed by commercial airlines are exempt from overtime under
Bottom line, the DOL currently considers commercial airline pilots,
as exempt employees not entitled to overtime. However,
it is the DOL’s position that other pilots, such as corporate
jet pilots, are non-exempt under 13(a)(1) and are entitled to
MINIMUM STANDARDS &
COLLECTIVE BARGAINING AGREEMENTS
In section 541.4, the FLSA establishes minimum standards that may
be exceeded, but cannot be waived or reduced. Employers may
provide these standards on their own or through a collective bargaining
agreement. See Brooklyn Savings Bank v. O’Neil,
324 U.S. 697, 706 (1945) and NLRB v. R&H Coal Co., 992
F2d 46 (4th Cir. 1993). Nothing in the FLSA relieves an employer
from its contractual obligation under a collective bargaining agreement.
ILLINOIS UNIQUE MOVE
In a unique move, out of concern for how the final federal overtime
regulations may affect Illinois residents, Governor Rod Blagojevich
(D) signed state legislation on April 2, 2004 exempting Illinois from
federal overtime rules; the Governor took this action prior to their
actual release. Federal law provides that if a state or local
law establishes a higher standard than the FLSA, the higher standard
applies. See Section 18 of the FLSA, 29 U.S.C. § 218.
The final regulations take effect on August 23, 2004. With only
a few short months to implementation, employers may wish to look at
non-supervisory employees classified as exempt in the administrative
and professional categories. Of all employees, these are
at highest risk of being misclassified under the new regulations.
CONGRESSIONAL REVIEW ACT
A small chance exists that FLSA’s regulations could be derailed
under the Congressional Review Act. That Act gives Congress
60 session days after the April 23, 2004 publication of the final
regulations to overturn them. (Congress used the Act in 2001
to overturn the Clinton Administration’s ergonomics regulations.)
Congress needs a simple majority vote of both House and Senate to
rescind the final regulations. If that vote did occur, President
Bush would likely veto the action. The Senate would then need
67 votes (a two-thirds majority) to overturn his veto. An override
vote appears unlikely given the current make-up of the Senate.
Short of overturning the proposed regulations, the Senate initiated
other means to modify the impact of the impending changes. In
fact, that process began on May 4th, 2004, when Sen. Judd Gregg, R-N.H.,
introduced an amendment that passed on a 99-0 vote, which would preserve
the current regulatory overtime status for 55 occupations or job classifications.
Then, Sen. Tom Harkin, D. Iowa, introduced an amendment that passed
on a 52-47 vote, which would allow only the increased salary requirements
from the new final regulations to be enforced, while preserving the
previous overtime regulations. Both amendments were offered
as riders to an unrelated tax bill (S. 1637). Now the issues
move to the House for further consideration. The overtime regulations
may very well become an issue in the upcoming presidential election.
U.S. Secretary of Labor Elaine L. Chao on April 27, 2004, named a
new enforcement task force within the Wage and Hour division of the
DOL to, as she puts it, “maximize” worker’s
rights under the final regulations. Non-exempt employees may
file complaints concerning overtime pay with the DOL either by mail
or in person at any WHD District Office. DOL indicates that
its investigators are discreet and will seek permission from the complainant
to use their name if required during an investigation. Additional
information concerning complaints may be found at http://www.dol.gov/esa/regs/compliance/whd/fairpay/complaint.htm
or by contacting the WHD toll-free between the hours of 8 a.m. to
5 p.m., in your local time zone at (866) 487-9243.
It should be noted that federal and state laws regarding overtime
are very detailed, containing several exceptions and caveats that
cannot be fully addressed in this article. Employers and employees
are advised to seek guidance from legal counsel regarding the handling
of overtime matters. Employers should also seek the advice of
legal counsel before refusing to pay employees overtime. This
article is not intended nor should it be considered legal advice.
Each overtime employment issue is unique and specific. Every
employer and employee is encouraged to seek guidance from legal counsel
concerning your specific overtime matter.
Jim Barber is an accomplished author with articles published in various
legal publications and journals. .
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