The United States Department of Labor (DOL) recently released two new opinion letters. Both are employer-friendly.
Opinion Letter FLSA2008-1 addressed whether purchasing agents in a private sector company were properly categorized as exempt administrative employees. Based on the specific context, DOL determined that the employees were exempt from overtime requirements. As a reminder, to meet the criteria for an administrative exemption, the position must: (1) meet the salary basis test; (2) have a “primary duty” of performing office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers; and (3) include the exercise of discretion and independent judgment with respect to matters of significance in performing the primary duties. 29 C.F.R. § 541.200(a).
The purchasing agents in this case were responsible for ensuring the timely order and delivery of materials; negotiating prices; maintaining records and handling returned goods; and selecting vendors. DOL properly gave great weight to the fact that the purchasing agents were authorized to make purchases up to $25,000 without managerial review or authorization. This fact was truly significant because 99 percent of purchasing orders fell below $25,000 – indicating that the purchasing agents consistently made significant financial decisions with little supervision. These facts met the test for the administrative exemption. As with previous guidance from DOL, this opinion letter underscores how heavily the agency considers an employee’s decision-making authority in determining exempt status.
Opinion Letter FLSA2008-2 deals with the substitution provision available to public sector employers. Public sector employees may agree, with the approval of the employer, to substitute during scheduled work hours for another employee in the same classification/position. 29 U.S.C. § 207(p)(3). (This situation may occur, for instance, when one employee agrees to cover another employee’s shift.) Under the FLSA, the employer may exclude “substitution hours” from the calculation of overtime. Id.
The specific issue addressed in the opinion letter was whether the substituting employee must receive any additional compensation for those hours. According to DOL, the public sector employer does not have to compensate the employee for those extra hours except where the employee has worked so many substitute hours that his wages for all hours worked fall below the minimum wage. In that case, the employer must be sure that the employee is paid at least minimum wage but still is not required to pay additional overtime. Conversely, the employer can remain in compliance with the minimum wage provision without paying any additional wages by denying any shift substitution requests that might drop the substitute employee’s hourly wages below the minimum wage.