Employment & Labor Insider

NOTE FROM ROBIN: This post is by Ellen Kearns, head of our Boston Office and co-chair of our Wage and Hour Practice Group.

You have probably heard by now that Patricia Smith, Solicitor of Labor, announced at the annual labor and employment conference of the American Bar Association that a final rule on the white-collar exemptions to the overtime regulations will not be issued until late 2016, which was a shock for those who’ve been following this issue and expected a final rule to be imminent.

Ms. Smith said that the main reason for the delay was that 270,000 comments were received in response to the proposed rule, issued on June 30. However, she also said that only approximately 6,000 of those comments were substantive. The rest were presumably “form” comments, or otherwise non-substantive, which means the DOL should not have had to spend much time on those.

Could the real reason for the delay be that the DOL is seriously considering making changes to the duties test? In its Notice of Proposed Rulemaking the DOL asked for "additional information on the duties tests for consideration in the Final Rule." Specifically,

[s]hould employees be required to spend a minimum amount of time performing work that is their primary duty in order to qualify for the exemption? If so, what should that minimum amount be? Should the Department look to the State of California’s law (requiring that 50 percent of an employee’s time be spent exclusively on work that is the employee’s primary duty) as a model?"

Under the current duties test there is no minimum percentage of time required for performing exempt work. Rather, “exempt work” must be the employee’s primary duty. The DOL has said that an employee who spends more than 50 percent of his or her time on exempt work “will generally satisfy the primary duty requirement.”

However, since the 2004 amendments to the white-collar regulations, there have been numerous exemption cases in which the courts have found exempt work to be an employee's "primary duty," even when the employee has spent significantly less than 50 percent of the time on exempt work. In some instances the time spent on exempt work was even less than 20 percent. In an Obama DOL, these statistics are likely to be concerning.

If the DOL changes the current duties test to impose a percentage limitation on non-exempt work, the change could create a particular hardship for industries such as fast food, restaurant, and hospitality, in which “exempt” managers may perform a significant amount of “non-exempt” work when non-exempt employees are absent, or during busy periods.

Whether the notice and comment requirements of the Administrative Procedure Act are satisfied when the DOL has invited comments on percentage limits, but has not proposed a specific regulation, remains to be seen.