Small Business Reading Room

Monday, January 12, 2004

SBA Office of Advocacy Seeks Clarity from Department of Labor

In a recent Guest Column for the Small Business Survival Committee, Thomas M. Sullivan, the Chief Counsel for Advocacy at the Small Business Administration points out how dangerous this time can be when there are new laws on the books and no specific guidelines issued by the Department of Labor.

"The U.S. Department of Labor is responsible for setting rules defining who is and is not an 'executive', 'administrative', or 'professional' employee, and therefore exempt from the workers' overtime pay requirement. The Department of Labor's current rules tell employers that an employee is exempt from the overtime requirement if the employee is paid a certain minimum salary (the 'salary test') and performs specific duties (the 'duties test'). The problem is the 'salary test' has not been updated for inflation in more than 20 years, and the 'duties test' is long, complex, and confusing."

And since the penalty for misinterpreting these rules is severe - up to three years back pay for each individual misclassified - employers are walking a fine line.

The Office of Advocacy position is that updated guidelines are desperately needed immediately and in the absence of these guidelines we end up with employment system that RELIES on litigation. Small business owners are more likely to settle out of court in a situation where such a high level of uncertainty exists.

If only the SBA Office of Advocacy could light a fire under the Department of Labor, I think we would all come out ahead. A call to action may be appropriate here. You may contact the U.S. Department of Labor by web mail form at .


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