The FLSA OT Exemption No Longer Computes!

When the DOL enacted the FLSA back in 1938 there were a couple of things that could not have been taken into account.  The whole basis for the overtime exemption was that certain employees were educated, trained, and responsible at a level that afforded a certain flexibility in how they get their job done.  Generally the argument was that sometimes those professionals would work 40 hours a week, sometimes they would work 45, and sometimes they would work 35.  Whatever it was, though, the expectation was that their annual salary should take into account the level of effort – and the time on task – required by the role. 

Well the times have changed and this exemption as originally designed is losing its applicability…entirely.  As an example (one that you all can identify with) I have a Blackberry on my person at all hours – in fact, it’s on my bedside table when I go to sleep.  It’s the first thing I look at when I wake up, the last thing I look at before I go to bed.  Yes, that’s sad…and mostly it’s my fault.  BUT…there is some Employer culpability here.  Employers have grown to assume – almost by accident – that the average managerial or executive level employee will be available and on-call 24/7.  This applies, by the way, even when one is on vacation.  I don’t think I’ve truly disconnected from the office on a vacation – like leave the computer and smart device at home – since our honeymoon back in 2001.  Seriously. 

My annual base salary is fair and market competitive, but if I were to calculate an hourly rate based on hours worked I can guarantee you it doesn’t come close to what it is designed to be.  See if you can follow me here…  Let’s assume: a) over the last five years smart devices have become widely adopted and used as a business tool, b) said smart device usage has resulted in, on average, an additional 1.25 hours of work every week every year over those last five years (a conservative estimate I’d say), c) annual base salaries have increased, on average, by 3% every year over the last five years.  If you can buy into these assumptions, then you better sit down.  You’re really only making .26% (yes, less than 1%) more than you were 5 years ago! 

 

So, Mr. DOL, I hereby propose that you amend the current exemption to read, “Should you require an exempt employee to carry a smart device so that he or she can access job related eMails and/or phone calls outside of the office, employer must also pay said exempt employee an “on-call” rate above and beyond their annual base salary.  The on-call rate should approximate 1/4 of their regular base hourly rate and should be paid for all waking hours outside of the workplace.  If employee is also required to remain on-call during scheduled and approved vacation, employer shall increase the on-call rate to 1/2 of their regular base hourly rate.”  So if you’re on board with this approach, contact your respective congressmen and let them know.  I say it’s time the market be forced to adjust to what has very nearly become free labor.

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5 Responses to The FLSA OT Exemption No Longer Computes!
  1. Jason Seiden
    February 3, 2010 | 3:52 pm

    Thought provoking and frightening.

    I think the rise of “profersonalism”–the blending of our personal and professional lives–makes this almost impossible to reconcile.

    For instance, why wouldn’t an employer argue that on-call pay be offset with a fractional salary deduction for those times you when you weren’t working but should have been?

    Maybe a discount of 1/4 salary *1.25 hours per week for most activities, and a 1/2 salary rate for slacking that resulted in someone else having to get called in after hours?

    With the melding of personal and professional worlds, it’s harder to think of the work day as a discrete thing. That’s a challenge for BOTH the employee–who is now on-call around the clock–and the employer, who has to somehow figure out how to do business 24/7 with a workforce that’s increasingly out of the office and on call.

  2. Charlie Judy
    February 3, 2010 | 4:35 pm

    Jason, sure the logic applies in both directions. Using a smart device may give you license to more slacking, but it doesn’t relieve you from the level of productivity you are ultimately held accountable to. I’m suggesting expectations around productivity have increased at a pace much quicker than corresponding pay. Eventually this should all catch up and be reflected in market rates, but there is no way we’re there yet…

    thanks, as always, for the thoughtful comments.

  3. Michael Haberman, SPHR
    February 11, 2010 | 1:23 pm

    The big issue with technology is not with the exempt employee, that comes with the territory and the law allows it. So suck it up or shut the phone off or change employers. The bigger issue is with non-exempt employees who stay connected. That, by law, requires compensation. So for employers who have non-exempts carry blackberrys how are you tracking time or controlling the usage? If you are not then you are going to get bit in the butt some day and it is going to be expensive.

  4. Charlie Judy
    February 11, 2010 | 2:29 pm

    Michael, i think you’re telling me to “suck it up or shut the phone off or change employers.” silly man, like it’s really that easy. oh that’s right, you’re a consultant and teacher. hmmmmmm.

    yes, if you give your non-exempt employees blackberries that’s just plain stupid. the legal aspects of FLSA are not lost on us, but that’s not the point. the point is that it’s much easier for employers to take advantage of exempt employees these days and everyone has been “suck[ing] it up” for quite some time now. during the industrial era, technology actually deflated wages because a human being was no longer as valuable on the shop floor. what we’re seeing here is that technology is actaully making the human more accessible – more valuable. yet there has been no corresponding increase in wages.

    thx for the comments.

  5. John Hunter
    April 11, 2010 | 3:30 pm

    I would say that those that many employees in such situations are paid a salary and are not paid for exact hours of work. Work has changed. I am a bit surprised we haven’t seen more people appreciate the huge salaries many in the USA get given the current economy but I guess that is a bit foolish. We tend to compare our situation to anyone that has it better than us and say it is unfair we don’t have it better. People would be a lot better off looking at all those that have it worse of than they do for no good reason and be thankful for what they have.

    At the same time I agree many organizations have reduced staff and piled too many responsibilities on those that are left. That is an issue to manage. But I don’t see it as a pay issue but as a well being issue. The agile software development community has a great view “The sponsors, developers, and users should be able to maintain a constant pace indefinitely.” That is a key to better managed organizations. Pay is important but it is separate from effective managing of overwork. It isn’t good to overwork and then just pay more money and think you solved the problem.

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