National Clothesline

In 2004, the Department of Labor adopted extensive new regulations under the Fair Labor Standards Act.

Those regulations were designed, in large part, to tighten up the exemptions from minimum wage and overtime compensation for executive, administrative, and professional employees.

The Department of Labor has recently issued several opinion letters designed to tighten up the regulations. It seems the DOL will not be satisfied until no one can understand the wage and hour laws.

Regardless, the opinion letters do suggest that the DOL is willing to consider the realities of the workplace, such as the increase in technology.

For example, one of the central requirements for the administrative exemption is that the employee exercise discretion and independent judgment.

If the employee just follows directions, he will rarely qualify as an administrative employee. In one of the opinion letters, however, the DOL noted that a mortgage loan officer would not be found nonexempt just because he used computer software that made it easier to exercise that discretion and judgment.

The DOL noted that the computer software did not tell the loan officers what to do. Had the software, however, told the officer what loans to offer or how to evaluate a particular applicant, the exemption probably would have been lost.

Therefore, the DOL recognizes that timesaving devices will not cause a loss of exempt administrative status, as long as the ultimate decisions are still made by the employee.

In another opinion letter, the DOL was concerned with the executive (or supervisor) exemption in a case where the executive or supervisor also did nonexempt work.

In this case, the employees involved were service station managers who occasionally did manual labor. The DOL left open the possibility that if the manager, who clearly had the authority to hire and fire, spent more time doing nonexempt work than supervising, he would be found to be entitled to overtime compensation. Because the manager rarely did manual labor, the DOL said that the exemption would stand.

The DOL also said that where a supervisor performs substantial nonexempt duties, it would be more lenient in finding an exemption where the level of education required for the supervisor’s job was significant.

In the drycleaning business, it may be time to review whether your supervisors, if treated as exempt, are doing too many non-supervisory tasks. If they are, overtime compensation could be an issue.

In a third opinion letter, the DOL looked at the administrative exemption and reinforced the requirement that the employee be involved with staff, not production, work.

In other words, for the administrative exemption to apply, the work must be non-production work, such as accounting, auditing, quality control, human resources, or similar support work.

If the employee in question is performing the core business of the employer, it is considered production work, and the exemption will probably be lost.

And speaking of administrative employees, Larry Flynt, the publisher of Hustler Magazine, had several executive assistants whose duties included making sure Flynt’s wife did not discover he was in his office with hookers.

Apparently, one of his assistants, while not having a problem with overtime compensation, did have a problem with the sounds coming from Flynt’s office when he was being visited by these “special friends.” She quit, claiming that she was the victim of sexual harassment.

A court in California has ordered Flynt to pay this former assistant $1.1 million as compensation for the harassment.

The arbitrator, whose decision was approved by the court, found that these special duties, which did involve the exercise of independent judgment and discretion, were beyond what an employer could expect a reasonable employee to endure, even if she knew she was working for a pornographer.

So, if you have employees you believe are exempt, but perform production duties, do non-administrative or non-supervisory work, or rarely exercise any independent judgment or discretion, you need to reevaluate that exemption.

And if Larry Flynt can be guilty of creating a hostile work environment based on sex, you might take a moment to make sure that none of your employees could allege, based on the atmosphere in your plant or store, that they are the victims of sexual harassment.