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New New Jersey White Collar Overtime Exemptions Regulations Follow Federal Regulations

  • September 13, 2011

The New Jersey Department of Labor and Workforce Development (“NJDOL”) has adopted the federal regulations regarding white collar overtime exemptions, repealing existing state regulations and eliminating inconsistencies between the two regulatory schemes.  This will provide employers with greater certainty regarding proper worker classifications and puts New Jersey in line with the majority of states that track certain federal overtime exemption requirements.  The new regulations are effective immediately.

Background: Inconsistencies

Both New Jersey and federal wage and hour laws exempt from overtime eligibility individuals employed in a bona fide administrative, executive, professional or outside sales capacity.  This is called the “white collar” exemption. To qualify for this exemption, the employer must show that employees satisfy both a “duties” test and a “salary basis” test.  The “duties” test looks at what an employee does. The “salary basis” test looks at the employee’s salary and requires that certain white collar employees be paid above a specific level of compensation.

Although the U.S. Department of Labor simplified the federal regulations governing the white collar overtime exemptions in 2004, New Jersey did not follow suit until now.  Under the federal regulations, an employee whose “primary duty” consists of the performance of exempt tasks, such as management tasks or non-manual work related to management or general business operations, may be classified properly as exempt.  The prior law in New Jersey, however, also required an employee to dedicate at least 80 percent of his or her workweek to the performance of exempt tasks.  No such limit exists in the federal rules.
 
The discrepancy between federal law and the former state regulations presented employers with the risk of properly classifying employees as exempt for purposes of federal law while violating New Jersey wage and hour law.  This made it difficult for employers to maintain or implement a uniform compensation system in a multi-state operation.

Adoption of Federal Regulations

The new regulations in New Jersey retain the duties and salary basis tests, but bring state law in line with the federal regulations by eliminating the 80-percent restriction on exempt work.  Now, to qualify for the white collar exemptions under New Jersey law, an employee’s “principal, main, major or most important duty” must be the performance of exempt work.  Among other factors considered in determining an employee’s “primary duty” is the importance of the exempt duties and the independence of the employee. 

Employers must look at each employee individually. Remember that under both federal and state law, a title, position description or any other label employers may place upon employees is not determinative — nor is the amount of time spent performing exempt tasks. Instead, employers must look at the tasks performed by the employee on a day-to-day basis. 

The NJDOL also has adopted the “super salary” test for executive, administrative and professional employees who receive annual guaranteed compensation of at least $100,000, made specific regulatory changes relevant to computer employees, and provided guidance and examples helpful in interpreting the regulations.

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With wage and hour class actions concerning white collar exemptions continuing to rise, employers should ensure they are familiar with the laws governing overtime exemptions under both federal and state law.  New Jersey’s adoption of the federal white collar overtime exemptions will make it easier for businesses to operate in New Jersey without exposing themselves to potential liability caused by inconsistent regulatory schemes.

Jackson Lewis attorneys are available to answer inquiries regarding this and other workplace developments.

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