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The Global Hospitality Advisor

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Politics Over, New �Overtime�
Law Takes Effect


by Scott Brink, September 2004

In the wake of bruising partisan politics, the United States Department of Labor�s (DOL) much-anticipated overhaul of the federal white-collar employee overtime exemptions became effective on August 23, 2004. Depending upon who you ask, the regulations could deprive as many as six million or as few as 107,000 workers of federal overtime pay. However, there is no dispute that the new regulations provide significant employer-friendly changes to the DOL�s old white-collar exemption rules, but do not preempt higher state standards, such as those in effect in California. Here are some of the more significant changes:

New Highly Compensated Employee Exemption. The DOL regulations create a new exemption for �highly compensated employees.� The overtime exemption applies to employees who: (1) perform office or non-manual work; (2) are paid total annual compensation of at least $100,000 (including at least $455 per week on a salary or fee basis); and (3) customarily and regularly perform any one or more of the exempt duties or responsibilities of an executive, administrative or professional employee.

New Remuneration Test. The new regulations significantly simplify the remuneration requirement of the exemptions while increasing the minimum salary required to meet the exemption. Under the new regulations, an employee must receive a minimum salary of $455 per week ($23,660 annually) to qualify for the executive, administrative or professional exemption. This �standard� remuneration test eliminates the confusing �short� and �long� tests with which employers have been burdened for years. Under the former regulations, the minimum weekly salary for the long test was $155, and the minimum weekly salary for the short test was $250.

New �Docking� Rules. The new regulations also expand an employer�s right to suspend exempt employees without pay. Under the old regulations, such a suspension could only occur in increments of a full workweek. Under the new regulations, suspensions in increments of one or more full days are permissible for violations of major safety rules or written workplace policies. This is a significant change as deductions in an amount less than a full workweek under the old regulations generally would ruin the employee�s exempt status.

Revised Duties Tests. The new regulations simplify the duties test for the executive exemption by eliminating the long and short tests and creating a standardized duties test. Under the new test, an exempt executive must be an employee: (1) whose primary duty is management of the enterprise in which the employee is employed or of a customarily recognized department or subdivision thereof; (2) who customarily and regularly directs the work of two or more other employees; and (3) who has the authority to hire or fire other employees or whose suggestions and recommendations as to the hiring, firing, advancement, promotion, or any other change in status of other employees are given particular weight.

Changes to the administrative exemption are more modest. The new administrative exemption applies to employees: (1) whose primary duty is 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 (2) whose primary duty includes the exercise of discretion and independent judgment with respect to matters of significance.

The new regulations also eliminate the old short and long duties test for the professional exemption. To meet the new professional exemption, the employee must have a primary duty of performing office or non-manual work: (1) requiring knowledge of an advanced type in a field of science or learning customarily required by a prolonged course of specialized intellectual instruction; or (2) requiring invention, imagination, originality, or talent in a recognized field of artistic or creative endeavor.

The computer employees exemption has been significantly revised by eliminating the requirement that the employee consistently exercise discretion and independent judgment. Under the new regulations, the exemption applies only to employees whose duty consists of: (1) the application of systems and analyst techniques and procedures, including consulting with users to determine hardware, software, or system functional specifications; (2) the design, development, documentation, analysis, creation, testing, or modification of systems or programs, including prototypes, based on and related to user or system design specifications; (3) the design, documentation, and testing, creation or modification of computer programs related to machine operating systems; or (4) a combination of the aforementioned duties, the performance of which requires the same level of skills. In addition, computer employees must earn at least $27.63 per hour (or receive more than $455.00 per week on a salary or fee basis) to qualify for this exemption.

No Preemption of State Law. When implementing the new regulations, employers should be mindful of more restrictive state law exemption requirements that may apply to their employees. For example, California�s minimum salary for its executive, administrative and professional exemptions if $540.00 per week. California employers who paid employees the lower federal minimum would lose the exemption. Employers must continue to comply with higher state law standards.



Scott Brink is a senior member of the Global Hospitality Group and a partner in the JMBM Labor Department. He ha over 15 years of experience representing employers in all aspects of labor and employment law. An experience trial attorney, Mr. Brink has litigated a number of high-profile and complex cases involving a wide range of labor and employment law matters. Mr. Brink�s practice emphasizes state and federal employment litigation, with a strong back ground in California wage and hour class actions, National Labor Relations Board practice and administrative proceedings before the Equal Employment Opportunity Commission, the Department of Fair Employment and Housing and the California Department of Labor Standards Enforcement.  For more information, contact Scott Brink at 310.785.5365 or [email protected].

The Global Hospitality Group® is a registered trademark of Jeffer, Mangels, Butler & Marmaro LLP

©2004 Jeffer, Mangels, Butler & Marmaro LLP

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For more information:
Jeffer, Mangels, Butler & Marmaro LLP
web site: http://www.jmbm.com
Email Jim Butler at [email protected]
Or contact 
Jim Butler at the Firm
 Jeffer, Mangels, Butler & Marmaro LLP
  1900 Avenue of the Stars
 Los Angeles, CA 90067
     Phone: 310-201-3526 
The premier hospitality practice
in a full-service law firm
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Also See: Hotel Franchise Agreements: Opportunities And Pitfalls / JMBM / September 2004
ADA Lawsuit Alert: Beware the Internet Surf-by; A new twist on the ADA drive-by lawsuit / JMBM / September 2004
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Wage and Hour Lawsuits and Audits Continue to Sweep the Hospitality Industry / The Global Hospitality Advisor / JMBM / October 2003
Prepare NOW for an ADA Attack; Myths and Tips on How to Minimize Exposure / The Global Hospitality Advisor / JMBM / October 2003
Sarbanes-Oxley Update / The Global Hospitality Advisor / JMBM / Arpil 2003
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Outlook 2003: A Roundtable Discussion / The Global Hospitality Advisor / JMBM / Dec 2002 
Time Bomb Waiting to Explode: Wage & hour Claims Over Exempt Employees / The Global Hospitality Advisor / JMBM / Oct 2002
I'm Mad as Hell, and I'm Not Going to Take it Anymore! / The Global Hospitality Advisor / JMBM / Oct 2002
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Outlook 2002: A Roundtable Discussion /  Bruce Baltin, Bjorn Hanson, Randy Smith, Jack Westergom - The Global Hospitality Advisor / January 2002 
New Rules for Hotel Workouts: REMICs for Dummies / The Global Hospitality Advisor / JMBM / December 2001 
Living in the Wake: Predictions & Practical Implications / The Global Hospitality Advisor / JMBM / December 2001 
Avoiding Liability for Lay-Offs / The Global Hospitality Advisor / December 2001
The Worker Adustment and Retraining Notification Act: Impact on the Hotel Industry / JMBM 
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The 'Perfect Storm' / The Global Hospitality Advisor / JMBM / September 2001 
Richard Kessler's Grand Theme Hotels - Interview with GHG Chairman  Jim Butler / March 2001
Stephen Rushmore's  Industry Trends / Top Markets, Predictions & Opportunities  / Jan 2001
Outlook 2001: A Roundtable Discussion The Global Hospitality Advisor / Jan 2001
Perspectives on Hotel Financing in 2001; Jim Butler, JMBM's Global Hospitality Group Chairman, Interviews Two Active Players in Hotel Finance / Jan 2001 
Robert J. Morse: Millennium�s New President / Interview with GHG Chairman Jim Butler / Nov 2000 
Special Reports / Jeffer, Mangels, Butler & Marmaro LLP

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