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Is the DOL Updating the Standard Duties Test?

August 03, 2015

The future of the standard duties test for exemption could have a significant impact on the retail and hospitality sector.

As detailed in our recent blog, “US DOL Proposes New FLSA Regulations,” the U.S. Department of Labor is working to change current rules regarding “white collar exemptions” based on employee salary level. Besides salary level, an employee’s duties are also analyzed to determine if he/she is eligible for an exemption from the minimum wage and overtime requirements of the FLSA.

Contrary to expectation, the DOL did not propose any updates to the standard duties test, like it did with the salary basis portion of the exemption, but the department is actively seeking comments about the success of the current system and where, if at all, it can stand to improve.

History of the standard duties test

The current duties test is intended to weed out employees who are not valid “white collar” exempt employees. For a long time there were two tests for exemption based on employee duties:

  1. Long test for employees paid a lower salary. The long duties test placed a limit on the amount of nonexempt work that could be performed- 20% for most employees, and 40% for those in the retail and service industries. This provided sufficient protection against exemption of white collar workers who should be overtime protected but were paid between the salary levels of the two tests.
  2. Short test for employees in the higher salary bracket. The short duties test did not place a limit on nonexempt work for employees making the higher short test salary or above.

The DOL decided in 2004 to modify this so that a single “standard test” would encompass the short duties tests and a salary test level updated from the long test salary.

What does the test entail?

The current standard duties test asks a number of questions to determine if exemption is warranted, which include:

  • Is the employee’s primary duty related to managing or controlling the general business operations of the company?
  • Does the employee have to use independent discretion and judgment concerning significant matters within the company?
  • Does the employee in question regularly supervise two or more employees of the department that he/she manages?
  • Does the employee have hiring or firing abilities?
  • How much working time does the employee in question spend leading other employees and performing all other responsibilities?
  • Which employees are under the direction of the employee in question?

Updates on the way?

The DOL is seeking comments on the current system, to answer specific questions about the test such as:

  • Should employees being considered for an exemption be required to spend a certain amount of time fulfilling their primary duty? What should that amount be?
  • Are exempt and nonexempt employees adequately distinguished in the single standard duties test for each exemption category?
  • Has it been a good decision in the long run to eliminate the long/short duties test structure?

Comments are most likely due around early September (60 days following the proposal’s publication in the Federal Register).

Questions? Contact any member of our Hospitality Services Group.

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