NJ Dept. of Labor Attempting to Amend State Wage and Hour Laws… for the Employer’s Benefit

A public hearing was held in Trenton, New Jersey on April 15, 2011 regarding a proposal to amend N.J.A.C. 12:56-6.1 and 12:56-7 with regard to exemptions from overtime compensation for executive, administrative, professional, and outside sales employees. The New Jersey Department of Labor and Workforce Development specifically wants to repeal its existing regulations for these exemptions and adopt the language of the federal counterparts instead. While the goal is to eliminate any inconsistencies between the state and federal regulations, the effect will be to lessen the burden on New Jersey employers hoping to justify denying overtime compensation to certain employees.

New Jersey’s current regulations, much like the federal ones, provide overtime exemptions for an individual employed in a bona fide administrative, executive, professional or outside sales capacity. However, significant differences have existed between the NJ state law and federal law since the U.S. Department of Labor overhauled the Federal overtime exemption regulations on August 23, 2004.

First, New Jersey requires an employee to dedicate at least 80 percent of his or her workweek to the performance of exempt tasks (i.e., management tasks, office or non-manual work related to management or general business operations, etc) to qualify for the overtime exemption. There’s a small exception for retail and service establishments, where the requirement is at least 60 percent exempt tasks. N.J.A.C. 12:56-7.1(a)(5) (executive); 12:56-7.2(a)(4) (administrative); 12:56-7.3(a)(4) (professional); 12:56-7.4(a)(2) (outside sales).

The federal exemptions, on the other hand, do not contain any express limitation on the percentage of time an employee may dedicate to the performance of exempt or non-exempt tasks to be eligible for an exemption. The federal statutes generally look at the “primary duty” of the employee as opposed to simply evaluating the duties which the employee spends the most amount of time performing. This permits employers to classify certain employees as exempt from overtime compensation even though the majority, and perhaps even a vast majority, of their time is spent doing manual and/or non-exempt tasks because the employees’ “primary duty” falls within the exempt category.

The second important difference is that New Jersey’s existing regulations frequently reiterate the requirement that exempt employees frequently, regularly, and/or customarily “exercise discretion and independent judgment” in order to fall within the executive, administrative, or professional exemptions. By contrast, federal regulations simply require that the “primary duty” of administrative employees “include the exercise of discretion and independent judgment with respect to matters of significance.” For executive and professional employees, there is no requirement regarding the need for the exercise of discretion and/or independent judgment in order to be included within the exemption. This is an important difference because the amount of discretion and independant judgment, i.e. authority and power, that an employee is given by the employer is a much more reliable test of whether the employee is truly deserving of the exempt status under the executive and professional exemptions.

Accordingly, if the changes go into effect, far more New Jersey employees are likely to be classified as exempt employees under the executive, professional, administrative, and outside sales person exemptions and will no longer receive overtime compensation. While the desire to eliminate the differences that exist is generally understandable, it should also be noted that the applicable federal regulations simply set the minimum standards on top of which the states may impose stricter regulations. Rather than choosing to stand by the employees working throughout the state, New Jersey is instead attempting to eliminate regulations that put more money into its citizens’ pockets. The 60-day comment period on the proposed amendments ends on May 20, 2011.

If you have any questions or concerns about your exempt status, contact Pogust Braslow & Millrood for a free consultation.