Topic:
WAGES;
Location:
WAGES;

OLR Research Report


October 4, 2004

 

2004-R-0756

CONNECTICUT AND NEW FEDERAL OVERTIME RULES

By: John Moran, Associate Analyst

You asked us to compare the new U.S. Department of Labor overtime regulations to Connecticut's overtime regulations and determine whether the new federal rules will affect Connecticut workers.

SUMMARY

The Fair Labor Standards Act (FLSA), the federal law establishing overtime requirements and exemptions, creates a minimum level of worker protection and allows states to set higher standards. The new federal regulations that went into effect August 24 change the criteria that determine whether many workers can be exempted from overtime. But Connecticut regulations generally provide a higher level of overtime protections for workers so the new federal rules have little immediate impact here.

Under the federal and state rules, whether an employee is covered by overtime protections is determined by looking at pay (amount and whether received on an hourly or salary basis) and job duties. Some determinations are made solely on pay level, but most weigh job duties once a certain pay threshold is reached. Under both sets of rules the facts of each case must be considered individually before a determination is made about whether a job is exempt from overtime.

The state and federal governments both have similar “duties tests” for determining overtime exemptions for executive, administrative, professional, and outside sales employees. But the Connecticut Department of Labor (DOL) requires employers to demonstrate a higher standard of executive and administrative duties than the federal rules. For example, the state requires an employee to spend at least 50% of his time managing to meet the standard for the administrative exemption, while the new federal rules are not definitive about time spent managing in order to qualify.

One significant change in the federal rules is that all workers earning less than $23,660 annually (up from the decades-old threshold of $8,060) will automatically be entitled to overtime pay regardless of their duties. This change virtually eliminates the need to apply for the state's duties test for low-wage workers.

The new federal rules also exempt those earning over $100,000 annually, with some exceptions, from overtime pay. But Connecticut does not recognize a pay ceiling that exempts an employee from earning overtime pay, so this also does not affect workers here.

The federal exemptions generally do not apply to “blue collar” workers, first responders (such as police), and union members. The state follows these standards.

FLSA OVERVIEW

The FLSA, first enacted in 1938, provides a basic level of minimum wage and overtime protections, with some exemptions, for workers. Under this law, unless an employee's job is exempted, the employee receives time and a half pay for any hours worked over 40 in a week.

The FLSA also allows states to set higher standards for minimum wage and overtime protections. About 18 states, including Connecticut, have set higher standards for overtime protections.

Under both state and federal law exemption specifics are established by agency regulations and do not require an act of Congress or the state legislature. Under both sets of rules the facts of each case must be considered individually before a determination is made about whether a job is exempt from overtime.

In Connecticut, as in most states, employers apply for exemptions to the state DOL. The state assigns an investigator to look at the specifics of the matter and make a ruling. The employer can appeal to DOL if he is unhappy with the ruling. If DOL determines the employer is not living up to it's ruling, it can pursue the matter through civil action court.

The federal exemptions to overtime do not apply to (1) manual laborers or other “blue collar” workers who perform repetitive, physical work and (2) first responders such as police, firefighters, correctional officers, emergency medical technicians, and others. Also nothing in the federal rules can be considered to waive an employer's responsibilities in a collective bargaining agreement. One variation the federal government allows is overtime for police, firefighters, and other first responders may be computed over a work period longer than the traditional five-day workweek. The state follows these standards.

OVERTIME IN CONNECTICUT

Connecticut law authorizes the labor commissioner to issue regulations defining the overtime exemptions for executive, administrative, professional, and outside sales employees (CGS Sec. 31-60). The law also requires him to adopt new regulations every four years, and Gary Pechie, the head of DOL's Wage and Workplace Standards Division, said the department is due to consider revising the regulations next year.

Pechie notes that the state and federal overtime rules are intended to protect employees, and therefore the burden of proof is on the employer to prove a job fits an exemption. “We're not giving you an exemption unless you prove it. It's a remedial law,” he said. “If it's a gray area, we are going to find that it's not exempt.”

The federal government's decision to list certain job titles as examples of exempt jobs illustrates another difference in approach between the federal and state governments. “A job title in one business may mean a completely different job at another business. So we stay away from using titles as examples,” said Pechie.

He also notes that the new federal rules could influence Connecticut's regulations, although he does not anticipate large-scale changes. “We've gotten a lot of questions on this and we will be looking at it real closely,” Pechie said.

FEDERAL AND STATE RULES COMPARISON

Duties Tests

The new federal rules, while they often use similar or identical language to the state rules, appear to allow more room for interpretation or gray area in interpreting the rules. State DOL plans to keep using its existing duties test and not, for example, remove the strict requirements for what constitutes “customarily and regularly” supervising others in the executive exemption duties test.

The following tables explain the federal and state rules and, where necessary, describe the differences in enforcement in situations where at first glance it would appear the federal and state rules are identical.

Executive Exemption

Table 1 outlines the four-part requirement for the federal executive exemption and the state three-part test. The language of the corresponding steps is very similar, but enforcement may differ.

The federal standard does not include a clear amount of time the employee must spend managing in order for the job to be exempted. Pechie said the state requires an employee's primary duty to be managing at least 50% of his time on the job to qualify for the executive exemption.

Also, part of the executive exemption on both levels requires the employee to “customarily and regularly direct the work of at least two or more other full-time employees or their equivalent.” But the federal rules define “customarily and regularly” to mean greater than occasional but less than constant; it includes work normally done every workweek, but does not include isolated or one-time tasks. This could include once a week supervisory duty, which the state would not consider sufficient for exemption.

All four federal test requirements must be met to receive the exemption. On the state level the first three requirements must be met.

Table 1. Executive Exemption Duties Test

Test Requirements

New Federal Rule

Existing State Rule

Enforcement

Difference

1. Weekly Salary (not hourly pay)

More than $455

More than $475

 

2. Employee duty

Primary duty must be managing the enterprise or a customarily recognized department or subdivision of the enterprise

Same as federal

State considers “primary duty” to be something the employee does at least 50% of the time. This standard is established in practice and is not set in regulation. The federal rule says “primary duty” means the principal, main, major, or most important duty the employee performs. State officials feel the federal rule no longer provides a “bright line” distinction since the “most important” duty of an employ may take up much less than 50% of his work time.

3. Supervision duty

Must customarily and regularly direct the work of at least two or more other full-time employees or their equivalent

Same as federal

Federal officials consider “customarily and regularly” to mean as little as once a week, and state officials would not count once a week as true supervision.

4. Hiring and promotion duty

Must have the authority to hire or fire other employees, or the employee's suggestions and recommendations as to the hiring, firing, advancement, promotion or any other change of status of other employees must be given particular weight.

Has no similar provision

State does not require this in order to grant the exemption

Administrative

Table 2 outlines the federal and state three-part requirement for the administrative exemption. In both cases all three prongs must be met. The language of the corresponding steps is very similar, but the enforcement may not be the same.

State officials define the required use of “discretion and judgment” in an employee's primary duty to mean it is a part of his daily job duties, not something exercised only occasionally. Federal rules are not as specific about the frequency of using discretion and judgment. “If using discretion is not part of your primary duty every day, then you are not exempt,” said Pechie.

Connecticut's enforcement was affirmed by the state Supreme Court in Butler v. Hartford Technical Institute (243 Conn. 454 (1997)). It upheld a lower court's ruling that a bookkeeper was not an administrator in the exempt sense and was entitled to overtime. The court found the bookkeeper operated under the close supervision of her boss (reported to him daily) and did not exercise discretion and independent judgment. The state DOL uses this case as a basis for its administrative exemption decisions.

Table 2. Administrative Exemption Duties Test

Test Requirements

New Federal Rule

Existing State Rule

Enforcement

Difference

1. Weekly Salary

(not hourly pay)

More than $455

More than $475

 

2. Employee duty

Primary duty must be office or non-manual work directly related to the management or general business operations of the employer or employer's customers

Same as federal

Little difference

3. Discretion and judgment

Primary duty must include the exercise of discretion and independent judgment in significant matters

Same as federal

Not clear at this time. The new federal rules say “discretion and independent judgment” implies the employee has the authority to make an independent choice, free from immediate direction or supervision, and factors may include, among others, whether the employee has the authority to (1) formulate, affect, or implement management policies and (2) commit the employer in matters that have significant financial impact. But the new rules also allow that if an employee's decisions are reversed after review that does not mean the employee is not exercising discretion and independent judgment.

State officials enforce the inclusion of discretion and judgment in primary duty to mean it is a part of the employee's every day job duties, not something that is only occasionally part of the employee's job. Federal rules are not as specific about frequency of using discretion and judgment.

Professional

The professional exemption, see Table 3 below, is basically the same at both levels, except the new federal rules (1) broaden the professional exemption by specifying certain job titles that Connecticut doesn't recognize and (2) relaxes the standard somewhat for creative professionals by no longer requiring that they either perform work requiring advanced knowledge acquired through a prolonged course of instruction or teach, instruct, or impart knowledge in an educational institution.

Table 3. Professional Exemption Duties Test

Test

Requirements

New Federal Rule

Existing State Rule

Enforcement

Difference

1. Weekly Salary

(not hourly pay)

More than $455

More than $475

 

2. Employee Duty

Must perform work requiring advanced knowledge in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction

Same as federal

See below

3. Discretion and Judgment

Must require constant exercise of discretion and judgment

Same as federal

Federal rules specifically cite certain job titles such as registered nurse, chef, actuary, and embalmer. State officials do not cite specific titles because each exemption application has to be judged on the individual facts of the situation.

4. Teacher duties (professional exemption subcategory)

Primary duty must be teaching, tutoring, or lecturing in the activity of imparting knowledge, and must be employed in an educational establishment.

Same as federal

Federal rules specifically cite certain job titles such as nursery school teachers. Connecticut does not typically exempt those positions because they usually do not require a college degree.

5. Creative professionals duties (new sub category added in new federal rules)

Primary duty must be work requiring invention, imagination, originality or talent in a recognized field of artistic or creative behavior.

The state standard also requires the creative professional to either (a) perform work requiring advanced knowledge or (b) teach, instruct, or impart knowledge in an educational institution. The federal standard does not require this.

 

NEW FEDERAL EXEMPTION: COMPUTER EMPLOYEE

The new federal rules create an overtime exemption for (1) computer systems analysts; (2) programmers; (3) those who design, document, test, or modify computer programs related to machine operations; or (4) any combination of the aforementioned. To be exempt from overtime, these workers can either be paid $455 or more per week on a salary basis or at least $27.63 an hour on an hourly basis.

Connecticut does not have a computer employee exemption, and Pechie said it would not use the one created by the federal government. He said employers could attempt to exempt computer employees by meeting the existing state standard for professional employees.

OUTSIDE SALES EXEMPTION

The new federal rules did not change the existing exemption standard for outside sales jobs. The state uses the same standard as the federal government: the employee's primary duty must be making sales or obtaining orders or contracts, and the employee must be customarily and regularly engaged away from employer' s place of business. The minimum salary requirement does not apply to this exemption.

FEDERAL OVERTIME INCLUSION FOR LOW-WAGE WORKERS

The new federal rules provide blanket overtime protection for all workers who earn $455 a week ($23,660 a year) or less regardless of their job duties (previously the automatic threshold was $8,060 a year). This is the biggest rule change that brings more people under the protection of overtime rules. It is expected to primarily help assistant managers in retail and fast-food businesses.

This change also virtually makes the Connecticut “long test” for job duties obsolete. Tables 1 through 3 above all describe the Connecticut “short test” for exemption status. The Connecticut “short test” is now the primary test used.

Before the federal changes, workers in Connecticut earning between $400 and $475 a week could be exempt only if they met the criteria of the “long test,” so named because it has more steps to satisfy. Now, only those Connecticut workers earning between $455 and $475 a week still fall under the long test, but Pechie said they rarely see cases that land within that range. He said in Connecticut cases almost always are above the $475 weekly threshold and therefore the “short test” for duties is used.

For more on the differences between the Connecticut long test, short test, and the new federal rules see this comparison prepared by DOL's Wage and Workplace Conditions Division: http://www.ctdol.state.ct.us/wgwkstnd/flsa-ctdol-compare.pdf.

NEW FEDERAL HIGH SALARY CEILING

The new federal rules also create a ceiling under which anyone earning over $100,000 annually is exempt from overtime pay if he or she regularly performs any one of the duties of an exempt executive, administrative, or professional employee as per the duties tests described above. The state does not recognize a salary limit in determining overtime status, so this provision does not affect Connecticut.

WEB SITES FOR MORE INFORMATION

U.S. DOL's Wage and Hour Division: http://www.dol.gov/esa/regs/compliance/whd/fairpay/main.htm.

CT DOL's Wage and Workplace Conditions:

http://www.ctdol.state.ct.us/wgwkstnd/wgemenu.htm.

JM:ts