Federal regulation makes 4.2 million employees eligible for overtime

Not all employees will walk away happy when a new U.S. ​Department of Labor regulation, signed into law by President Barack Obama last month, goes into effect on Dec. 1. Under the new regulation, most salaried workers who earn up to $47,476 annually will qualify for time-and-a-half overtime pay when they work in excess of 40 hours per week. This salary threshold is more than double the previous threshold set at $23,660 in 2004. Similarly, highly compensated employees, or employees who, in the preceding year, owned 5%​ percent of the company or received compensation over $120,000 will see an annual salary threshold increase from $100,000 to $134,004. 

Salaried workers earning between the two thresholds, who work primarily in an "executive, administrative, or professional" capacity will continue to be exempt from receiving overtime pay under the new regulation, and thus disputes regarding the meaning of this exception will also continue. According to the Office of Personnel Management (OPM)​, which is responsible for the administration of the Fair Labor Standards Act (FLSA) for federal employees, this language shall be "narrowly construed to apply only to those employees who are clearly within the terms and spirit of the exemption."

According to the FLSA, an employee falls within the "executive" exception if that employee’s primary duty consists of managerial tasks, such as interviewing, training, supervising employees and making discretionary decisions without supervision.

The potential for employer-employee disputes as to an employee’s primary duty is especially high in the case of the mixed employee who engages in both exempt and non-exempt activity at the workplace. For example, in Grandits v. U.S. (2005) the U.S. Court of Federal Claims concluded that the plaintiff, a GS-12 grade employee who worked for the U.S. Customs Service as a "T​team L​leader"​ was not exempt from receiving overtime pay. The court argued that despite his title, the plaintiff’s primary duty was not management because he did not have any personnel, staffing or budgeting authority; lacked authority to discipline employees; and did not issue performance appraisals. In its decision the court also stated that the P​plaintiff often engaged in lower grade tasks, such as classifying imports, that were non-exempt in nature and that his work was supervised.

In order to fall under the "administrative" exception, an employee must engage primarily in office work related to management. In Berg v. U.S. (2001), the United States Court of Federal Claims ruled that the plaintiffs, who were electronic technicians in the Military Radar Unit in the Air Force, were non-exempt employees because they did not fall within the administrative exception. The C​court found that the employees’ primary duty was to maintain, repair and certify equipment and although this work was "crucial" to the success of the flight mission, it was not "crucial to the successful management" of the base.

Owners of many large companies oppose this new rule. Instead of complying, these company owners could find a backdoor by forcing employees to work off the clock, when they work in excess of 40 hours per week, in lieu of granting them overtime or come up with other clever ways to dodge the rules. 

With Republican lawmakers vowing to block this regulation in a mandated Congressional review period, it will be a waiting game to see if this regulation will actually go into effect on Dec. 1, as currently planned. 

If you feel as though you have been misclassified or are forced to work off the clock, you should contact an experienced federal employment attorney immediately to discuss your options.

Cheri Cannon is D.C. Managing Partner at Tully Rinckey PLLC and the former chief counsel to the chairman of the Merit Systems Protection Board. She concentrates her practice in federal sector employment and labor law and can be reached at info@fedattorney.com.