Legislature should restore overtime exemptions

By Staff reports | Apr 3, 2014

By BRIAN M. PETERSON


By BRIAN M. PETERSON

MARTINSBURG -- On April 1, Gov. Earl Ray Tomblin signed a minimum wage bill into law which inadvertently strips away numerous federal overtime exemptions currently available to West Virginia employers.

In order to make the minimum wage hike applicable to as many employers as possible, the law eliminated a broad employer exemption from the state law.  That change had the inadvertent effect of also making the state’s outdated overtime rules applicable to nearly every employer in the state.

Under state law, the minimum wage is set by the West Virginia Minimum Wage and Maximum Hours Standards law, which has the same purpose as the Federal Fair Labor Standards Act (FLSA).  The state law requires payment of a minimum wage and time-and-a- half for hours worked in excess of 40 in a workweek.  The state law has been on the books for decades, but historically, it has not applied to most employers in the state because of a rather broad exemption.

The state law has excluded from the definition of "employer" "any individual, partnership, association, corporation, person or group of persons or similar unit if eighty percent of the persons employed by him are subject to any federal act relating to minimum wage, maximum hours and overtime compensation.”  Because the FLSA applies to just about everyone, this “80-percent exemption” exempted nearly every employer in the state.  So, employers simply had to follow the federal standards.

This year, the Legislature wanted to raise the minimum wage above the federal standard.  To accomplish that goal, they amended the definition of “employer” to eliminate the “80-percent exemption.”  Unfortunately, the drafting approach the Legislature took had the unintended consequence of removing the 80-percent exemption from not only the minimum wage provisions, but also from the overtime provisions.

When it comes to wage and hour laws, the federal law does not preempt the state law if the state law is more generous to employees.  So, if an employee is overtime exempt under the federal law, but non-exempt under state law, then the employee is entitled to overtime.  To be exempt from both laws, employers must have the same exemption under both the federal and the state law.

The problem is, under the new law the state and federal exemptions no longer match.  There are 19 state exemptions, and more than 50 federal exemptions.  While some overlap, most do not.  Among the current federal exemptions that do not exist under state law are exemptions for computer professionals, commissioned sales employees of retail and service establishments, seasonal and recreational establishments, companions for the elderly, and for highly compensated employees (making more than $100,000 per year).

Federal law also has limited overtime exemptions for municipal firefighters and law enforcement employees which allow cities to calculate overtime on periods longer than a 7-day work week.  For example, firefighters can be paid overtime under federal law beginning after 106 hours in a 14-day period instead of after 40 hours in a 7-day period.  These exemptions would be lost under the new state law.  The loss of the firefighter exemption alone will cost some municipalities hundreds of thousands of dollars annually.

Our Legislature did not recognize the problems with HB 4283 until after the regular session concluded and the bill was passed by large majorities in both chambers.  Once employers realized the far-reaching, unintended consequences of HB 4283, they urged the Governor to veto the bill.

While the Governor recognized the flaws, he chose not to exercise his veto power.  Instead, upon signing the bill, the Governor announced that he intends to call the Legislature into extraordinary session during the May interims “to address the issues of great concern to businesses large and small.”  He stated that “Senate President Kessler and Speaker Miley have both committed to working with me to achieve this ultimate goal.”

At this time the specifics of the proposed “fix” have not been set forth, but it is very encouraging that there is agreement among our elected leaders to rectify the problem that has unintentionally been created.  Thanks goes to each of Governor Tomblin, President Kessler and Speaker Miley for their commitment in this regard.

The good news is that from a drafting standpoint,  the fix is easy.  In the special session, the Legislature can simply amend the new law to restore the “80-percent exemption,” but make it narrower so that it exempts employers only from the state’s overtime standards.  This would make employers subject to state law for minimum wage purposes, but not for overtime purposes, which was the Legislature’s original intent.

Restoring all of the federal overtime exemptions to our state’s employers is the right thing to do.  Now, let’s all support the Governor, the President and the Speaker in making sure this happens in the upcoming special session.

Peterson is a partner in the Martinsburg office of Bowles Rice.  He is a member of the firm's Labor and Employment Group and a practice group leader in the firm's Litigation Department.

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