Overtime Pay Lawyers More About the FLSA  
IV. OUR PROPOSAL FOR FURTHER STUDY - THE UNITED STATES DEPARTMENT OF LABOR'S 2004 "SOLUTION" DID NOT GO FAR ENOUGH
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     We suggest a solution with several components: a precise cut off based on earnings and explicit notification of certain employment terms for certain employees. Specifically, workers earning over six and one-half times the minimum wage should not be covered by the FLSA's overtime pay requirements. Workers who earn below three times the minimum wage may not be classified as exempt administrative, executive or professional employees. Workers earning between three and six and one-half times the minimum wage must negotiate a written wage agreement which specifies wages, whether the employee will receive any overtime pay or compensatory time off for working over a set number of hours and the maximum number of hours that the employee may be asked to work in a week. Such agreements must be signed by both parties before commencement of the employment relationship.

     This proposal acknowledges that employees at the low end of the wage scale generally require statutory protection from employers motivated to work them over forty hours in a workweek because of high fixed costs and low marginal costs of employment. We also assume that market forces will permit employees earning at least three times the minimum wage to obtain employment which offers an acceptable work schedule. Employees will be able to chose employment options based, inter alia on written wage agreements which state the maximum hours an employee may be asked to work.63 Lastly, we assume that employees earning over six and one-half times the minimum wage do not need legislative assistance to enable them to work an acceptable work schedule.64

     Obviously, these assumptions require further study, and may require testing. Some employees would undoubtedly earn less money and work longer hours. Low paid administrative, executive and professional workers would likely either earn more money or work fewer hours. Other workers would likely seek to bargain collectively to ensure that they continue to receive overtime pay. Employers requiring fluctuating workweeks and employees desiring flexible hours would be afforded such options under our proposal.

1. Employees earning less than three times the minimum wage require protection.

     The Department of Labor has been grappling with the minimum salary administrators, executives and professionals must receive before they may be deemed exempt from the FLSA's overtime pay requirements.65 Generally, when based on a forty hour week, the minimum salary equals between one and one-half and three times the minimum wage.66 The Department of Labor therefore believes that employees earning a salary of between one and one-half and three times the minimum wage or less should not be deemed exempt administrative, executive or professional employees. In order to help ensure that employees at the low end of the wage spectrum are not overworked, we suggest that employees earning three times the minimum wage or less not be treated as exempt administrative, executive or professional employees. These employees must therefore be paid one and one-half times their normal rate of pay for all overtime hours worked.

     The 2004 regulations came close to our recommendation in this respect, setting a $455 minimum weekly salary requirement.

2. Employees earning between three and six and one-half times the minimum wage require flexibility and clear notice of employment terms.

     Equiflex options, twelve hour shifts, rotating schedules, business cycles, parental responsibilities, rush orders, and flexible leave policies are just some of the reasons both employers and employees may want to deviate from a forty hour workweek. Compensatory time off in lieu of overtime pay is an option often desired by both employees and employers. The FLSA serves no redeemable purpose by restricting the use of compensatory time and other flexible work schedules.

     Rather, before the employment relationship commences, the employer and employee should be required to enter into a written wage agreement which specifies the employee's wage, overtime eligibility, maximum number of permissible work hours and any other equiflex parameters.67 The individual wage agreement would substitute for the FLSA's maximum hours standard. If employees know at the commencement of their employment relationship about their right to receive overtime pay after working a certain number of hours in the workweek, they will better understand their rights and employers will better understand their obligations. Market forces will then come in to play to determine which employees will receive overtime premium pay. Employees should be permitted to decide whether to accept an employment offer based upon an employer's promises regarding wages, overtime pay, compensatory time off and maximum hours. Employers would then be restricted from altering the wage agreement downwards.69

     The U.S. Department of Labor should not dictate specifically which employees must receive overtime pay. Further regulations should not require when employees must have their work time recorded, especially when some employees would find such records demeaning.70 The federal government should not require overtime pay when some employees would prefer compensatory time in lieu of overtime pay.

     The required wage agreements proposed herein would address several of the predominant problems with the salary basis test. They would provide both employers and employees with clear notice of employment terms. They would also allow employers to tailor schedules to those required by their individual work forces without imposing penalties upon them for doing so. Additionally, they would permit employees to make informed decisions concerning their choice of employment. Finally, wage agreements would eliminate the need to rely upon inconsistent court decisions and constantly changing job duties to determine whether employees are subject to overtime pay premium requirements. Although a method of enforcing such agreements will then be required, there are various formats by which this may be accomplished. For example, labor tribunals or efficient administrative hearings may be used as a quick means of adjudicating wage agreement disputes.

     Critics will obviously argue that employees earning over three times the minimum wage still have unequal bargaining power and thus will be forced to work longer hours. Our response is that a national crisis would not result if the workweek is made longer for some employees, especially if more people are working, other employees are permitted to work flexible hours, more low wage earners are covered by the FLSA's maximum hours standard, employees know their rights, employer profits are increased and companies based in the United States are more competitive in international markets. Further, unions can play a vital role assisting employees with negotiating more preferable wage agreements in situations where employers are seeking to take advantage of any unequal bargaining power which may exist.71 Lastly, an efficient, inexpensive method of enforcing wage agreements would place employees in a much better position to enforce their rights. Many of the rights afforded employees by the FLSA are currently ignored because employees do not understand their rights and because it is often very burdensome, expensive and time consuming to enforce such rights.

     The 2004 regulations completely ignored our suggestions here. We are left with an antiquated framework of white collar exemptions that serves no purpose.

3. Employees earning over six and one-half times the minimum wage may be deemed exempt.

     Our proposal concerning employees earning over six and one-half times the minimum wage is based upon Congress' past use of this cut-off in its creation of an exemption for computer analysts.72 When computers were first utilized, the individuals programming them required advanced degrees. These individuals were clearly professionals. Now, children may be expert computer programmers. The concept of a "professional" as a computer programmer is no longer useful. Another exemption was therefore created for individuals who program computers based on their hourly wage rather then their classification as an executive, administrative or professional employee. Computer programmers and analysts who earn over six and one-half times the minimum wage may now be deemed exempt from the FLSA's overtime premium pay exemptions.73 These workers were exempted from the overtime pay requirement because they are, ". . .highly educated, highly skilled and highly paid. They are the backbone of many of the high-technology industries that fuel our growing economy. It is imperative that they be exempted from these provisions so that they are able to provide services as efficiently and productively as possible."74

     If the reasons to exempt the computer analysts earning such a wage are valid (for example, key employees are more efficient and productive if exempt from the FLSA's overtime pay requirements75), then all employees earning such a wage should be exempt from the FLSA's overtime pay requirements.76

     The 2004 $100,000 safe harbor exemption meets the same objective.
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63. White p. 72, citing Best 1980. Forty percent of full-time workers would likely forgo some income for a reduction in work hours. (back)
64. These assumptions are, in part, based upon the theory that individual employees should be categorized by their value (i.e. their wage) and not by where they may fall on an organizational chart. (See Reich, supra at 99 (1991)). (back)
65. Regulatory changes proposed to increase the minimum salary in 1981 have been put on hold indefinitely. See 541.1(f) - proposed. There are technically two tests which apply to determine whether such workers may be deemed exempt. Currently, workers earning a salary of $155 may be exempt if their exempt duties constitute at least eighty percent of their worktime. Workers earning a salary of $250 may be exempt if their exempt duties constitute over one-half of their worktime. This is expected to change in August 2004 when the 2004 regulations are scheduled to become effective. (back)
66. The long test is not considered herein as it provides that exempt employees may earn less than the minimum wage. (back)
67. The wage agreement may also provide for compensatory time in lieu of overtime pay. The benefits of compensatory time off are articulated by Senator Wallop in the Congressional Record. See supra. (back)
68. Employers should also be required to put any statements regarding job security in such a pre-employment agreement as well so employees are able to more intelligently to make decisions whether to accept a job. For example, a clear statement that an employee is employed at will would serve both to notify employees of their at-will employment relationship and insulate employers from breach of contract suits. However, this aspect of the agreement is not the subject of this article. (back)
69. Perhaps a six month notice term could be required before a wage agreement could be changed if an at-will employment relationship exists. Without such a term, the employer would be free to offer an agreement and then change the employee's working conditions right after the employee begins his or her employment. Such a requirement would not affect the employee's job security, as it would merely state the terms of employment while employed. Regulations would have to be promulgated which define when the six month notice must be given and whether there may be any exceptions to this general rule. For example, one exception to this general rule would arise when an employee desires to switch from receiving overtime pay to compensatory time for working over a set number of hours. (back)
70. See Andrea Gerlin, Firm's Paralegals Can Be Exempt From Overtime Pay, Jury Decides, Wall St. J., Mar. 16, 1994, at B4. (back)
71. One study concludes that employers will prefer to increase wages, and not reduce hours in collective bargaining, White p. 56 citing Bienefeld, 1972. However, collective bargaining can still help ensure that employees are not overworked. (back)
72. 29 C.F.R. 541.312 (1993) (Pursuant to Public Law 101-583, enacted November 15, 1990, payment "on a salary basis" is not a requirement for exemption in the case of those employees in computer-related occupations, as defined in 541.3(a)(4) and 541.303 who otherwise meet the requirements of 541.3 and who are paid on an hourly basis if their hourly rate of pay exceeds 6 1/2 times the minimum wage provided by section 6 of the Act.) (back)
73. 29 C.F.R. 541.3(e) (1993). (back)
74. 135 Cong. Rec. 3742 (daily ed. Apr. 12, 1989) (statement of Sen. Kerry). (back)
75. Id. (back)
76. Perhaps the notion of a mandatory wage agreement could be extended to this group as well once a mechanism to properly enforce such agreements is fine-tuned. (back)
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