08/11/2004
by Jim Nys, Personnel Plus! Consulting Services
On Aug. 23, new federal rules take effect which will result in the most sweeping changes in federal overtime pay rules in more than a quarter century. In addition to complying with the new rule, employers must also comply with State or municipal laws, regulations or ordinances establishing a higher minimum wage or lower maximum workweek than those established under the FLSA. Where Montana and federal rules are now largely the same, the changes will result in employers having to satisfy two different standards - the current Montana laws that will not change and the new federal rules. Simply put, you must satisfy all of the state requirements to be exempt under state law and all the federal requirements to be exempt under federal law. If you omit one or more of the requirements than the position might be exempt under one set of rules but the employee would retain eligibility for exemption under the other rules.
While employers may, on their own initiative or under a collective bargaining agreement, provide a higher wage, shorter workweek, or higher overtime premium than provided under the FLSA. While collective bargaining agreements cannot waive or reduce FLSA protections, nothing in the FLSA or the Part 541 regulation relieves employers from their contractual obligations under such bargaining agreements.
To qualify for exemption, employees generally must meet certain tests regarding their job duties and be paid on a salary basis at not less than $455 per week (federal). For example in the executive exemption, the new federal rule requires that the person hire and fire. The state's short test rule doesn't require that so the federal rule is more stringent since getting overtime is the higher standard compared to being exempt. Conversely, the state will probably require that two employees being supervised work 40 hours per week (or close to it) while the feds might allow fewer work hours where fewer hours to be defined as "full time" is the norm.
In order for an exemption to apply, an employee's specific job duties and salary must meet all the requirements of the Department's regulations.
Executive Exemption
To qualify for the executive employee exemption, all of the following tests must be met:
- The employee must be compensated on a salary basis (as defined in the regulations) at a rate not less than $455 per week;
- The employee's primary duty must be managing the enterprise, or managing a customarily recognized department or subdivision of the enterprise;
- The employee must customarily and regularly direct the work of at least two or more other full-time employees or their equivalent; and
- The employee must have the authority to hire or fire other employees, or the employee's suggestions and recommendations as to the hiring, firing, advancement, promotion or any other change of status of other employees must be given particular weight.
Administrative Exemption
To qualify for the administrative employee exemption, all of the following tests must be met:
- The employee must be compensated on a salary or fee basis (as defined in the regulations) at a rate not less than $455 per week;
- The employee's primary duty must be the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer's customers; and
- The employee's primary duty includes the exercise of discretion and independent judgment with respect to matters of significance.
Professional Exemption
To qualify for the learned professional employee exemption, all of the following tests must be met:
- The employee must be compensated on a salary or fee basis (as defined in the regulations) at a rate not less than $455 per week;
- The employee's primary duty must be the performance of work requiring advanced knowledge, defined as work which is predominantly intellectual in character and which includes work requiring the consistent exercise of discretion and judgment;
- The advanced knowledge must be in a field of science or learning; and the advanced knowledge must be customarily acquired by a prolonged course of specialized intellectual instruction.
To qualify for the Creative professional employee exemption, all of the following tests must be met:
- The employee must be compensated on a salary or fee basis (as defined in the regulations) at a rate not less than $455 per week;
- The employee's primary duty must be the performance of work requiring invention, imagination, originality or talent in a recognized field of artistic or creative endeavor.
Outside Sales Exemption
To qualify for the outside sales employee exemption, all of the following tests must be met:
- The employee's primary duty must be making sales (as defined in the FLSA), or obtaining orders or contracts for services or for the use of facilities for which a consideration will be paid by the client or customer; and
- The employee must be customarily and regularly engaged away from the employer's place or places of business.
Not Exempt:
These exemptions do not apply to:
1. Manual laborers or other "blue collar" workers who perform work involving repetitive operations with their hands, physical skill and energy such as production, maintenance, construction and similar occupations such as carpenters, electricians, mechanics, plumbers, iron workers, craftsmen, operating engineers, construction workers and laborers no matter how highly paid they might be.
2. Police, fire fighters, paramedics, detectives, deputy sheriffs, state troopers, highway patrol officers, investigators, inspectors, correctional officers, parole or probation officers, park rangers, emergency medical technicians, ambulance personnel, rescue workers, hazardous materials workers and similar employees, regardless of rank or pay level who perform work such as preventing, controlling or extinguishing fires of any type; rescuing fire, crime or accident victims; preventing or detecting crimes; conducting investigations or inspections for violations of law; performing surveillance; pursuing, restraining and apprehending suspects; detaining or supervising suspected and convicted criminals, including those on probation or parole; interviewing witnesses; interrogating and fingerprinting suspects; preparing investigative reports; or other similar work.
Montana Differences:
Montana Employers must be aware of differences between the federal and state rules:
1. Montana does not recognize the computer professional exemption.
2. Montana does not recognize the new "highly compensated employee" exemption.
3. Montana will likely continue to enforce the following current standards:
a. Primary duty of 50 percent or more performance of exempt work. (New Federal rule drops the percentage test.)
b. Requirement that executives supervise two or more 40-hour-per-week employees. New federal rule allows industry custom to define "full-time."
c. May not allow deductions for disciplinary suspensions.
4. Outside sales definition will follow federal rule.
5. Effect of violations of salary basis rules may be broader under Montana enforcement. (New federal rules limit disqualification to those supervised by same official in same job title during period of non-compliance.)
