A Publication of WTVP

Most employers’ pay practices, including those of staffing firms, are governed by The Fair Labor Standards Act (FLSA). The FLSA was enacted in 1938 not only to provide minimum labor standards, but also to increase employment. In general, the FLSA is the federal labor law that sets standards for minimum wage, overtime pay, equal pay, record keeping, and child labor. The law also establishes an exemption from the Act’s overtime provisions for employees in certain professional, executive, and administrative jobs, also known as white collar exemptions.

This January, the Department of Labor (DOL) Wage and Hour Division intends to propose revisions to these white collar exemptions in the FLSA. The Wage and Hour division is the government entity responsible for the enforcement of the rules and regulations of the FLSA. They will ask Congress to take a comprehensive review of the FLSA and make necessary changes to reflect the modern workplace. They argue the current state of the law is confining and outdated.

For example, in 1938, the business world had relatively distinct lines drawn between management and so-called rank-and-file workers. Since that time, however, millions of new jobs and job titles have been created, making it difficult for employers to rely on the FLSA’s outdated regulatory tests to determine if an employee is exempt or non-exempt (salaried or hourly). The confusion often reveals employers who don’t know they’re in breach of the law until they’re on the receiving end of a lawsuit.

In addition, the modern workplace is a dynamic environment that’s flexible and technology-driven. Yet, the FLSA doesn’t take into account the impact modern technology has had on employment and the work place. The result is employers and employees, who are increasingly looking for flexibility, have been trapped within the confines of this 64-year-old law.

The DOL thinks now is the time to make changes because the environment for regulatory revisions will be conducive for only so long. They believe new regulations will have to be out in 2003, considering 2004 is an election year. While previous efforts to update the tests have failed, the current administration may have a better chance at reforming the regulations based on widespread support from professionals within the Wage and Hour Division and the business community who agree the regulations are very overdue for revision.

Thus far, the head of the Wage and Hour Division, Tammy McCutchen, has met with several management and labor groups. The meetings confirmed trying to find a middle ground amongst very opposing points of view will make revising the regulations a difficult task. Regardless, the drafting of proposed changes aimed at updating the criteria for determining whether an employee meets the white collar exemptions is currently underway. Some ideas for change in the FLSA include the use of compensatory time off in lieu of overtime pay and allowing more flexibility for employers to offer their non-exempt employees bonuses and certain stock options.

Stay tuned—your job is about to change. IBI