Unless an employee falls within an exempt category of workers, the federal Fair Labor Standards Act (FLSA) requires the employer to pay the employee overtime at a rate of one and one-half times the regular rate of pay, for hours worked in excess of 40 hours per week. To be exempt is to be ineligible for overtime. The exemption commonly called the “white collar” exemption is for professional employees.

Federal regulations in place since August 2004 have simplified the test for determining which employees come within the white collar exemp­tion. An employee is a professional if each of the following elements is pres­ent:

(1)  The employee has the primary duty of performing work requiring ad­vanced knowledge, that is, work that is mainly intellectual in nature and which includes the consistent exercise of discretion and judg­ment;

(2)  The employee has advanced knowledge in a field of science or learning; and

(3)  The employee has advanced knowledge that is customarily ac­quired by a prolonged course of specialized intellectual instruction.

 
Recent Cases
In one recent case, a company refused to pay overtime to some of its employees who were licensed pharmacists. Much to the dismay of the em­ployees, the company’s reliance on the white collar exemption held up in fed­eral court. All of the parties agreed that the second and third parts of the ex­emption test were met by the pharmacists, leaving a dispute only over whether the pharmacists’ work re­quired the consistent exercise of dis­cretion and judgment. The court found that this element also was present.

The pharmacists, with little super­vision, routinely made discretionary decisions about dispensing prescribed drugs to patients, and sometimes the process required consultation with the physicians who prescribed the drugs. The only factor suggesting a lack of discretion was the fact that the employ­ees, as a rule, were expected to follow standard operating procedures from their employer.  But this argument by the pharmacists was undermined by the fact that they regularly were asked to consult with the employer about the standard procedures and to review them for any suggested improvements. The pharmacists also had the employer’s blessing to stray from the pro­cedures if, in their judgment, it was necessary for a patient’s health.

Assuming an employee is eligible for overtime pay, questions can arise as to what comprises an employee’s regu­lar rate of pay for purposes of calculating the overtime obligation. It is not always as simple as using an em­ployee’s base hourly rate or salary. For example, in another recent case, a fed­eral court ruled that the regular pay of municipal firefighters included pay­ments made to them under a city’s sick leave buy-back program. A firefighter who had built up a certain amount of sick leave had the right to “sell” it back to the city for a lump-sum payment. Whenever this happened, the em­ployer effectively was paying the fire­fighters a bonus for good attendance and for work they had already done. It was as much a part of the firefighters’ regular compensation as their base hourly wage, so it had to be taken into account in calculating overtime wages.