On April 20, 2004, the Department of Labor (“DOL”) issued what will be known as “Fair Pay” regulations that substantially revise the existing regulations for the so-called “white collar” exemptions to overtime and minimum wage under the Fair Labor Standards Act. These regulations, which differ significantly from the proposed regulations issued on March 31, 2003, will become effective 120 days after publication in the Federal Register, which has not yet occurred.

Because of the significant changes from the initial proposed regulations, many of which were the result of the numerous comments received by the DOL, we wanted to provide this brief update to clients and friends to alert you to the issues that you will need to address over the coming months to be compliant.

For example, workers earning less than $23,600 (or $455 per week) are guaranteed overtime regardless of their job duties. This is an increase from the proposed level of $22,100 (or $425.00 per week). Further, manual or blue collar workers and public safety employees are also entitled to overtime and not included within any of the overtime exemptions.

The “highly compensated” test, which was originally set at $65,000 per year, was increased $35,000 to $100,000 and the employee must also customarily and regularly perform exempt duties, in addition to meeting the salary amount.

There are also changes to the duties tests for the executive, administrative and professional exemptions. For example, the administrative test will now retain the old “discretion and independent judgment” standard, but with significant clarification as to how that term is to be applied in the work place.

The new regulations also address improper deductions and have retained a “safe harbor” provision to correct improper deductions. However, employers are required to have a clear, written deduction and correction policy if they want to save an employee’s exempt status.

Because of these changes, and the impact that new regulations of this kind will have on the modern workplace, companies such as yours should immediately consider securing special training and services, including education on the new regulations, an audit of existing pay practices and job descriptions to comply with the new rules and development of pay policies and practices to maximize the benefits of the safe harbor provision. Please contact us at your earliest convenience to discuss these services, which we will be providing immediately to clients and prospective clients.

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Mr. Shill and Mr. Gold are part of Rhoads & Sinon LLP’s Employment & Labor Law Group. If you have questions, you may reach Mr. Shill at (717)231-6665, or by e-mail at tshill@rhoads-sinon.com or Mr. Gold at (717) 237-6702, or by email at kgold@rhoads-sinon.com.