The Fair Labor Standards Act: A Historical Sketch of the Overtime Pay Requirements of Section 13(a)(1) Page: 2 of 93

                                
The Fair Labor Standards Act: A Historical Sketch of
the Overtime Pay Requirements of Section 13(a)(1)
Summary
Section 13(a)(1) of the Fair Labor Standards Act permits exemption of
employers of bona fide executive, administrative and professional employees from
the minimum wage and overtime pay requirements of the act; that is, from the basic
federal labor standards (wage/hour) statute. What constitutes a bona fide executive,
administrative or professional employee has been left by Congress for the Secretary
of Labor to define and delimit. That process, begun in 1938, continued intermittently
until 1975. Thereafter, no further general updates have been made. The Bush
Administration has now proposed a general revision of the regulation (29 CFR 541).
The first Section 13(a)(1) regulation appeared in 1938. Inter alia, it imposed
two classification tests. First. To qualify as bonafide, a worker had to be paid at a
rate befitting an executive or administrator. Second. The worker had to perform the
actual work (duties) of an executive or administrator. A salary threshold was set at
$30 a week. Initially, professionals were subject only to a duties test. In 1940, an
earnings threshold ($50 a week) was set for professionals.
The definitions were modified periodically (both the earnings thresholds and the
duties tests) so that they could, credibly, serve as indicators of who ought to be
deemed an executive, administrator or professional for Section 13(a)(1) purposes.
The updates were always contentious. The lower the thresholds, the greater the
number of workers who would find themselves unprotected by the minimum wage
and overtime pay provisions of the FLSA. Thus, it was in the interests of employers
to keep the thresholds low - and the duties tests as broad as possible. Workers
sought the opposite: a higher threshold and a narrow definition of duties.
The last general revision occurred in 1975, but the effort encountered significant
objections from employers. In 1978, a further update was proposed. Initially a
matter of controversy, the final rule was unpublished until January of 1981 - and
thereafter withdrawn for review by the new Reagan Administration. It never
reappeared. The thresholds remain at 1975 levels: $155 per week for executives and
administrators and $170 for professionals - with slightly lower levels for Puerto
Rico, the Virgin Islands and American Samoa. The duties tests have evolved, slowly,
since 1938 but remain heavily anchored in regulations from the act's early history.
On March 31, 2003, Wage/Hour Administrator Tammy McCutchen published
in the Federal Register a proposed update of the Section 13(a)(1) regulation. The
proposal sparked an intense public and legislative debate. (See, inter alia, H.R.
2660, H.R. 2673, H.R. 2665, H.R. 4520, S. 1485, S. 1611, and S. 1637 of the 108th
Congress.) On April 23, 2004, DOL issued the rule in final form (Federal Register,
April 23, 2004, pp. 22122-22274) to take effect the last week of August 2004. The
new provisions have now been placed in effect.
This report sketches the evolution of the Section 13(a)(1) regulation and
explores the arguments, pro and con, that it has encountered. It will be updated if
developments warrant.