The U.S. Department of Labor ("DOL") has adopted (effective August 2004) new regulations affecting employers.1 The new regulations focus primarily upon "white collar exemptions" included in the provisions of the Fair Labor Standards Act of 1938 ("The Act").2 That Act was designed to, and still does, cover issues of minimum wages, work hours, and overtime pay. The new regulations are intended to clarify the Act’s white collar exemptions, focused primarily on executive, administrative, and professional type employees. These are the first regulations to attempt to clarify the Act’s exemptions since 1949. In clarifying the exemptions, the DOL hopes to, among other things, increase overtime pay protection for millions of employees.3
Camp organizations are concerned about the breadth of the new regulations and their potential application to the camp industry. Here, we provide a brief overview of the Act, its new regulations, and potential impact. This article is no substitute for the advice of informed legal counsel, who can analyze compliance issues specific to each organization’s operation and any applicable state laws.
Background of the Act
The Act exempts certain organizations and employees from its requirements. Non-exempt employees of certain "covered enterprises" are subject to the Act. A covered enterprise is one which has at least two employees engaged in interstate commerce (a very broad category of activities, which generally will include camps), and has gross annual sales or a "business volume" in excess of $500,000 (or was a covered enterprise on March of 1990 when the law was changed to increase this gross sales figure to $500,000). Other enterprises are specifically described as "covered," including hospitals, schools, etc. The employee, to be subject to the Act, must be a bona fide employee, that is, not an independent contractor, volunteer, or a trainee. The Act describes factors to assist in identifying independent contractor, trainee or volunteer status. Employees of enterprises that are not "covered enterprises" may also be subject to the Act, if their work regularly involves them in commerce between the states. The breadth of the Act’s coverage indicates that most camp’s employees would be covered, absent exemptions. Certainly, work with your legal counsel to determine these coverage issues.
Penalties for failure to comply with the Act (e.g., failure to pay overtime by mis-classifying an employee or otherwise) include: payment of the sums wrongfully withheld, applicable liquidated damages, and, if a willful violation can be shown, certain penalties and potential imprisonment.6 A dispute in this regard may be handled administratively, before an office of the DOL, or the aggrieved employee may file suit. Again, consult with counsel regarding these procedures.
Existing FLSA Exemption for Employees of Seasonal Amusement or Recreational Establishments and Other Related Entities
Importantly, the new regulations do not interpret or change an existing FLSA exemption for employees of ". . . amusement or recreational establishments, organized camp(s), or religious or nonprofit educational conference center(s) . . ." that operate no more than seven months a year, or whose income during two consecutive six-month periods in a calendar year does not exceed certain levels.7 This exemption would appear to cover many "seasonal" camp organizations, exempting those organizations from the Act’s requirements, and potentially eliminating the need to consider the Act’s new regulations regarding white collar exemptions. Camp organizations should have their employment law counsel analyze this exemption closely, as those organizations consider compliance issues.
Caution! Consider Stricter State Laws
Whether considering the application of these new regulations or the application of other portions of the Act, such as the "Seasonal Amusement" exemption, camp organizations are cautioned to have employment law counsel review existing state law. As noted in the Regulations8, the Act and its interpretive regulations are minimum standards only. Therefore, organizations must comply with stricter state laws — those states that may offer more generous benefits, or fewer exemptions (for example, states that may not allow an exemption for Seasonal Amusement type entities or may require a higher minimum wage or overtime pay).9
Snapshot of the New Regulations
The focus of the new regulations, again, is white collar exemptions. Generally, the policy behind the Act’s exemptions is the recognition that salaried employees who are better paid, often entitled to fringe benefits and bonuses, and whose job duties include the exercise of judgment, management, and oversight, do not need benefits such as overtime pay. In addition, there was recognition that overtime pay would be difficult to quantify for salaried employees.10 The new regulations clarify exemptions from overtime for several classes of these "salaried" employees, including executive, administrative, and professional employees, in addition to outside salesmen, computer and "highly compensated" employees.11 The general criteria for these white collar exemptions include an employee’s payment on salary basis, a minimum salary payment, and performance of primary duties in executive, administrative, and professional-type occupations.
Regulations affecting substantially all these categories include:
- A job title is not sufficient to justify an employee’s exempt status; generally, salary and duties will define the exemption12;
- In addition to any other applicable requirements, to qualify as an exempt employee in one of the listed categories, the employee must be paid a salary of at least $455 per week ($23,600 per year), . . . exclusive of board, lodging, or other facilities13;
- To qualify as exempt under any of the listed categories, the employee’s "primary duty" must be in the performance of exempt work; actual time spent performing exempt duties is an important factor, but not the sole criteria for determining an employee’s primary duty/ies14;
- The exempt categories do not include employees training for executive, administrative, professional, outside sales or computer employee positions who are not actually performing the duties in those positions15;
- Workplace emergencies — an exempt employee will not lose their exempt status by performing emergency related nonexempt work16;
- Employees who perform a combination of exempt duties that cross categories — for example, someone whose primary duty involves exempt administrative and executive work, may qualify for an exemption.17
Regulatory changes and clarifications highlighted by category:
Executive employees: In addition to applicable salary requirements, clarification that an executive employee’s "primary duty" must be . . . management of the enterprise . . . ; that they customarily direct the work of two or more employees; and that they have the authority to "hire or fire" or that their comments in that regard will be given "particular weight."18
Administrative employees: In addition to applicable salary requirements, clarification that an administrative employee’s "primary duty" must be the performance of . . . office or non-manual work directly related to . . . management of the employer’s general business operations or customers, and that the employee’s work involve the . . . exercise of discretion and independent judgment . . . in important matters.19
Professional employees: In addition to applicable salary requirements, clarification that a professional employee’s "primary duty" must be performing work requiring advanced knowledge in science or fields requiring a . . . prolonged course of specialized intellectual instruction . . . or, work requiring invention, imagination, or talent . . . in a field or artistic or creative endeavor.20
Outside salesmen: Clarification that an outside sales employee’s "primary duty" must be in making sales or obtaining orders for the employer, and . . . customarily and regularly . . . working away from the employer’s place of business in this work. (No salary requirements here.)21
Computer employees: In addition to applicable salary or pay requirements, clarification that a computer employee’s "primary duty" must include: the analysis, creation, design, testing, etc., of computer systems.22
Highly compensated employees: A highly compensated employee must make at least $100,000 in annual compensation (including the minimum salary discussed above) and . . . customarily and regularly perform . . . any one or more of the exempt duties of an executive, administrative, or professional employee.23 The rationale for this category is that significant compensation is a "strong indicator" of exempt status, eliminating the need for a detailed analysis of the employee’s job duties.
How Does this Affect Camp Organizations?
A comprehensive analysis of the Act’s new regulations is beyond the scope of this article; however, here are some thoughts:
- Have your legal counsel closely examine the exemption for amusement or recreational establishments, organized camps, and religious or nonprofits discussed earlier in this article. If your camp falls within that exemption, adherence to, or compliance with these new regulations governing the white collar exemptions may not be necessary.
- The increased salary requirements (to meet the exemptions) do not include board and lodging.
- Under the new regulations, an employee who makes less than $455 a week is covered under the Act (not exempt), even if his duties meet the other criteria of a "white collar" worker. However, an employee who makes the minimum salary is not entitled to an exemption unless he or she meets the white collar exemption criteria.
Let’s consider the application of the new regulations to two typical camp staff positions: a director of maintenance who supervises others and a camp counselor who has some twenty-four-hour-a-day responsibilities and shares a cabin with campers. What exemptions from the regulations and the Act — its minimum-wage, maximum-hour, and overtime provisions — might apply to either or both of these positions?
The initial inquiry would be to determine if the camp is covered under the Act — i.e., is the camp a "covered enterprise" (see previous discussion). In addition, are the director and counselor both employees? [If they are employees and work in interstate commerce, notwithstanding the "covered enterprise" issue, it appears they would be covered under the Act (see previous discussion)]. The director of maintenance is most often an employee, although in some camp situations, the counselor may be an independent contractor or an unpaid volunteer or trainee. In the latter case, camp legal counsel should analyze the requirements under the Act for its description of bona fide nonemployee status. Qualifications for a volunteer include: no expectation or receipt of compensation, that the work done is "toward public service, religious, or humanitarian objectives," and that the volunteer does not replace genuine employees. The criteria for establishing a person as a trainee are much more difficult to meet. Whether you are seeking to qualify the counselor, or other position, as an independent contractor, volunteer, trainee, or other "nonemployee," seek the help of qualified legal counsel, for these provisions are quite complex.
Additionally, even if the Act applies, an important initial inquiry is whether a Section 213(a)(3) exemption (covering employees of amusement or recreation establishments, organized camps, and religious or nonprofit education centers) applies. Relevant to the inquiry would be, primarily, whether your camp ("organized" or not) qualifies as one of these establishments (and meets the seasonality requirements [months of operation or revenue distribution]). In this scenario, neither the director nor the counselor is entitled to coverage under the Act, including overtime that may be available by virtue of the new regulations. However, the camp and its legal counsel must consider applicable state law. If, for example, state law is more generous in allowing overtime pay than the federal Act and its regulations, the camp may not be able to rely on the 213(a)(3) exemption.
If at this point in your analysis you have found no exemption for the counselor or the director, your lawyer may look at the new regulations regarding white collar exemptions. As discussed above, the availability of these exemptions depends upon the status of the employee as salaried, the amount of the salary, and whether his or her duties meet specific executive, administrative, professional, or other criteria. It appears unlikely that a counselor would meet the minimum salary criteria ($455 per week), (or the executive, management, or administrative prerogatives included in the white collar exemptions) and would therefore not be exempt under the white collar provisions. However, the director of maintenance may well qualify if he or she earns a salary more than the minimum amount specified, and performs duties described in any one of the several categories previously identified. Note that the director may qualify for an exemption even if his duties represent a combination of exempt duties crossing the various categories of white collar employees. (The regulations state: [t]hus, for example, an employee whose primary duty involves a combination of exempt administrative and exempt executive work may qualify for exemption). Also note that the maintenance director may be exempt even if he is not supervising others (for example, he or she fulfills the criteria of an exempt "administrative" employee).
Note that the director who receives compensation of at least $100,000 per year (including at least $455 per week as salary or fees), and customarily and regularly performs at least one of the executive, administrative, or management duties described in the regulations, is also exempt.
Again seek the advice of counsel in these matters. While the new exemptions have for their announced purpose, in part, the simplification and clarification of existing provisions of the Act, they, and other provisions of the Act, are complicated.
How to Evaluate Compliance?
- Work with informed legal counsel to examine the regulations vis-à-vis your operation. Make sure that your legal counsel examines both state and federal law (refer to "Caution! Consider Stricter State Laws" on page 4 regarding the potential for stricter state laws).
- Consider an audit that can assist your organization in evaluating compliance with the new regulations. Qualified legal counsel may be able to conduct such an audit, or suggest other experts to do so.
Understanding the new regulations under the FSLA and the potential impacts of the Act within the camp industry is the first step in quelling the concern your camp may have about the far-reaching effects of these regulations. This brief overview of the Act, including an informative snapshot of the regulations and examples of applicability to camps, is designed to help you prepare to take the next steps to ensure your camp meets the new regulatory requirements and, if necessary, consult with informed legal counsel.
© 2004 Charles R. "Reb" Gregg and Catherine Hansen-Stamp
|1 The regulations are located at 29 Code of Federal Regulations ("CFR") 541.0 – 710.|
|2 29 CFR 541.0(a); the FSLA is located at 29 U.S.C. 201, et seq.; "white collar" exemptions located generally at 29 U.S.C. 213(a)(1) and see also 213(a)(17) regarding computer personnel.|
|3 See DOL comments, 69 Federal Register 222122, p. 4.|
|4 House Vote Defies Bush on Overtime, Rocky Mountain News, 9/10/04.|
|5 The Wall Street Journal, September 15, 2004.|
|6 29 U.S.C. 216.|
|7 See 29 U.S.C. 213(a)(3).|
|8 29 C.F.R. 541.4).|
|9 See DOL fact sheet #18 discussing the "Seasonal Amusement" exemption, at www.dol.gov/esa/regs/compliance/whd/printpage.asp?REF=whdfs18.htm |
|10 See DOL comments, 69 Federal Register 222122, p. 4.|
|11 29 CFR 541.0. The new regulations define that certain classes of workers will never, by definition, fall within the "white collar" exemptions. These employees include manual laborers or other blue collar workers, in addition to police officers, sheriffs, investigators, emergency medical personnel and others . . . regardless of rank or pay. The regulations articulate that these types of employees are not exempt from overtime because their primary duties do not involve management of the enterprise, or other duties outlined in defining the white collar exemptions. 29 CFR 541.3.|
|12 29 CFR 541.2.|
|13 29 CFR 541.600. The provision authorizes salary payment in bi-monthly, monthly or other methods of pay. Note that this provision includes some salary exceptions or variations for some types of exempt employees, i.e. academic administrative employees, professional teachers and computer employees.|
|14 29 CFR 541.700.|
|15 29 CFR 541.705.|
|16 29 CFR 541.706.|
|17 29 CFR 541.708.|
|18 29 CFR 541.100 et seq.|
|19 29 CFR 541.200 et seq. The regulations provide examples of a variety of administrative type positions at 29 CFR 541.203. This exempt category includes administrative employees employed by educational establishments, detailed at 29 CFR 541.204.|
|20 29 CFR 541.300 et seq. This category would exempt registered nurses and teachers, for example. However, licensed practical nurses and other similar health care employees . . . are specifically excluded (not exempt), primarily because these positions do not customarily require an advanced professional degree. 29 CFR 541.301(e)(2) and see DOL comments, 69 Federal Register 222122, p.3.|
|21 29 CFR 541.500 et seq.|
|22 29 CFR 541.400 et seq.|
|23 29 CFR 541.601.|
Originally published in the 2004 Fall issue of The CampLine.