[Federal Register: July 28, 2008 (Volume 73, Number 145)] [Proposed Rules] [Page 43654-43673] From the Federal Register Online via GPO Access [wais.access.gpo.gov] [DOCID:fr28jy08-15] ======================================================================= ----------------------------------------------------------------------- DEPARTMENT OF LABOR Wage and Hour Division 29 CFR Parts 4, 531, 553, 778, 779, 780, 785, 786 and 790 RIN 1215-AB13 Updating Regulations Issued Under the Fair Labor Standards Act AGENCY: Wage and Hour Division, Employment Standards Administration, Department of Labor. ACTION: Notice of proposed rulemaking and request for comments. ----------------------------------------------------------------------- SUMMARY: In this proposed rule, the Department of Labor (Department or DOL) proposes to revise regulations issued pursuant to the Fair Labor Standards Act of 1938 (FLSA) and the Portal-to-Portal Act of 1947 (Portal Act) that have become out of date because of subsequent legislation or court decisions. These proposed revisions will conform the regulations to FLSA amendments passed in 1974, 1977, 1996, 1997, 1998, 1999, 2000, and 2007, and Portal Act amendments passed in 1996. DATES: Comments must be received on or before September 11, 2008. ADDRESSES: You may submit comments, identified by RIN 1215-AB13, by either one of the following methods: Electronic comments, through the federal eRulemaking Portal: http:// [[Page 43655]] www.regulations.gov. Follow the instructions for submitting comments. Mail: Wage and Hour Division, Employment Standards Administration, U.S. Department of Labor, Room S-3502, 200 Constitution Avenue, NW., Washington, DC 20210. Instructions: Please submit one copy of your comments by only one method. All submissions received must include the agency name and Regulatory Information Number (RIN) identified above for this rulemaking. Comments received will be posted to http:// www.regulations.gov, including any personal information provided. Because we continue to experience delays in receiving mail in the Washington, DC area, commenters are strongly encouraged to transmit their comments electronically via the federal eRulemaking Portal at http://www.regulations.gov or to submit them by mail early. For additional information on submitting comments and the rulemaking process, see the ``Public Participation'' heading of the SUPPLEMENTARY INFORMATION section of this document. Docket: For access to the docket to read background documents or comments received, go to the federal eRulemaking Portal at http:// www.regulations.gov. FOR FURTHER INFORMATION CONTACT: Richard M. Brennan, Director, Office of Interpretations and Regulatory Analysis, Wage and Hour Division, Employment Standards Administration, U.S. Department of Labor, Room S- 3506, 200 Constitution Avenue, NW., Washington, DC 20210; telephone: (202) 693-0051 (this is not a toll-free number). Copies of this notice may be obtained in alternative formats (Large Print, Braille, Audio Tape or Disc), upon request, by calling (202) 693-0023 (not a toll-free number). TTY/TDD callers may dial toll-free (877) 889-5627 to obtain information or request materials in alternative formats. Questions of interpretation and/or enforcement of regulations issued by this agency or referenced in this notice may be directed to the nearest Wage and Hour Division (WHD) District Office. Locate the nearest office by calling our toll-free help line at (866) 4USWAGE ((866) 487-9243) between 8 a.m. and 5 p.m. in your local time zone, or log onto the WHD's Web site for a nationwide listing of Wage and Hour District and Area Offices at: http://www.dol.gov/esa/contacts/whd/ america2.htm. SUPPLEMENTARY INFORMATION: I. Electronic Access and Filing Comments Public Participation: This notice is available through the Federal Register and the http://www.regulations.gov Web site. You may also access this notice via the WHD home page at http://www.dol.gov/esa/whd/ regulations/FLSA2008.htm. To comment electronically on federal rulemakings, go to the federal eRulemaking Portal at http:// www.regulations.gov, which will allow you to find, review, and submit comments on federal documents that are open for comment and published in the Federal Register. Please identify all comments submitted in electronic form by the RIN docket number (1215-AB13). Because of delays in receiving mail in the Washington, DC area, commenters should transmit their comments electronically via the federal eRulemaking Portal at http://www.regulations.gov, or submit them by mail early to ensure timely receipt prior to the close of the comment period. Submit one copy of your comments by only one method. II. Request for Comment The Department requests comments on all issues related to this notice of proposed rulemaking. This proposed rule, if implemented as a final rule, will enhance the Department's enforcement of, and the public's understanding of, compliance obligations under the FLSA by replacing out of date regulations. The changes will not result in additional compliance costs for regulated entities. Updating the existing outdated regulatory provisions to reflect current law may result in cost savings through the avoidance of inadvertent violations and the costs of corrective compliance measures to remedy them. III. Discussion of Changes The FLSA requires covered employers to pay their nonexempt employees a federal minimum wage and overtime premium pay of time and one-half the regular rate of pay for hours worked in excess of forty (40) in a work week. The FLSA also contains a number of exemptions from the minimum wage and overtime pay requirements. Over the years, Congress has amended the FLSA to refine or to add to these exemptions and to clarify the minimum wage and overtime pay requirements. As part of the U.S. Troop Readiness, Veterans' Care, Katrina Recovery, and Iraq Accountability Appropriations Act, 2007, Public Law 110-28 (May 25, 2007), Congress increased the FLSA minimum wage in three steps: to $5.85 per hour effective July 24, 2007; to $6.55 per hour effective July 24, 2008; and to $7.25 per hour effective July 24, 2009. As part of the Small Business Job Protection Act of 1996, Congress amended section 4(a) of the Portal Act, 29 U.S.C. 254(a), to define circumstances under which pay is not required for employees who use their employer's vehicle for home-to-work commuting purposes. The 1996 Act also created a youth opportunity wage at $4.25 per hour under section 6(g) of the FLSA, 29 U.S.C. 206(g). In 1997, Congress amended section 13(b)(12) of the FLSA, 29 U.S.C. 213(b)(12), to expand the exemption from overtime pay for workers on ditches, canals, and reservoirs where 90% (rather than 100%) of the water is used for agricultural purposes. In 1998, Congress added section 3(e)(5) to the FLSA, 29 U.S.C. 203(e)(5), to provide that the term ``employee'' does not include individuals who volunteer solely for humanitarian purposes to private non-profit food banks and who receive groceries from those food banks. In 1999, Congress added section 3(y) to the FLSA, 29 U.S.C. 203(y), to define an employee who is engaged in ``fire protection activities.'' In 2000, Congress added section 7(e)(8) to the FLSA, 29 U.S.C. 207(e)(8), to treat stock options meeting certain criteria as an additional type of remuneration that is excludable from the computation of the regular rate. A 1974 amendment to section 13(b)(10)(B) of the FLSA, 29 U.S.C. 213(b)(10)(B), extended an overtime exemption to include any salesman primarily engaged in selling boats and eliminated the overtime exemption previously in subsection (B) for partsmen and mechanics servicing trailers or aircraft. In addition, several appellate courts interpret the overtime exemption for ``any salesman, partsman, or mechanic primarily engaged in selling and servicing automobiles'' in section 13(b)(10)(A) of the FLSA, 29 U.S.C. 213(b)(10)(A), as including service advisors. A number of courts have examined the proper interpretation of the FLSA's compensatory time provisions in section 7(o)(5) concerning public agency employers' obligation to grant employees' requests to use ``comp time'' within a ``reasonable period after making the request if the use of the compensatory time does not unduly disrupt the operations of the public agency.'' 29 U.S.C. 207(o)(5). Finally, the regulations governing the ``fluctuating workweek'' method of computing half-time overtime pay for salaried nonexempt employees who work variable or fluctuating hours from [[Page 43656]] week to week are in need of clarification and updating to delete outmoded examples and eliminate confusion over the effect of paying bonus supplements and premium payments to affected employees. As discussed in more detail below, as a result of these amendments and court decisions, this proposed rule revises a number of out-of-date regulations issued under the FLSA and the Portal Act. 1. 2007 Amendment to the FLSA Minimum Wage On May 25, 2007, President Bush signed into law the U.S. Troop Readiness, Veterans' Care, Katrina Recovery, and Iraq Accountability Appropriations Act, 2007 (Pub. L. 110-28). As part of that legislation, Congress amended the FLSA by increasing the applicable federal minimum wage under section 6(a) of the FLSA in three steps: to $5.85 per hour effective July 24, 2007; to $6.55 per hour effective July 24, 2008; and to $7.25 per hour effective July 24, 2009. This legislation did not change the definition of ``wage'' in section 3(m) of the FLSA for purposes of applying the tip credit formula in determining the wage paid to a qualifying tipped employee. Thus, the minimum required cash wage for a tipped employee under the FLSA remains $2.13 per hour. The maximum allowable tip credit for federal purposes under the FLSA increases as a result of the 2007 legislation, and is determined by subtracting $2.13 from the applicable minimum wage provided by section 6(a)(1) of the FLSA. See 29 U.S.C. 203(m). Changes are proposed in several of the FLSA's implementing regulations that cite to the applicable minimum wage to reflect these statutory changes, including at 29 CFR 531.36, 531.37, 778.110, 778.111, 778.113, and 778.114. Additional revisions to the McNamara- O'Hara Service Contract Act regulations eliminate outdated references to the FLSA minimum wage in 29 CFR 4.159 and 4.167. 2. Small Business Job Protection Act of 1996 On August 20, 1996, Congress enacted the Small Business Job Protection Act of 1996 (SBJPA), Public Law No. 104-188, 100 Stat. 1755. SBJPA amended the Portal Act to define circumstances under which pay is not required for employees who use their employer's vehicle for home- to-work commuting purposes and also amended the FLSA by creating a youth opportunity wage and modifying the allowable tip credit. A. Employee Commuting Flexibility Act of 1996 Sections 2101 through 2103 of Title II of SBJPA, entitled the ``Employee Commuting Flexibility Act of 1996,'' amended section 4(a) of the Portal Act, 29 U.S.C. 254(a). The amendment, effective upon enactment, provides that The use of an employer's vehicle for travel by an employee and activities performed by an employee which are incidental to the use of such vehicle for commuting shall not be considered part of the employee's principal activities if the use of such vehicle for travel is within the normal commuting area for the employer's business or establishment and the use of the employer's vehicle is subject to an agreement on the part of the employer and the employee or representative of such employee. Employee Commuting Flexibility Act of 1996, Section 2102, 29 U.S.C. 254(a). The House Committee Report states that the purpose of the amendment is to clarify how the Portal Act applies to ``employee use of employer- provided vehicles for commuting at the beginning and end of the workday.'' H.R. Rep. No. 104-585, at 6 (1996). It states that such travel time is to be considered noncompensable if the use of the vehicle is ``conducted under an agreement between the employer and the employee or the employee's representative.'' Id. The agreement may be a formal written agreement, a collective bargaining agreement, or an understanding based on established industry or company practices. Id. In addition, ``the work sites must be located within the normal commuting area of the employer's establishment.'' Id. at 4-5. Activities that are merely incidental to the use of the vehicle for commuting at the start or end of the day are similarly noncompensable, such as communication between the employee and employer to obtain assignments or instructions, or to report work progress or completion. Id. at 5. This statutory amendment to the Portal Act affects certain regulations in 29 CFR parts 785 and 790 issued pursuant to the FLSA and the Portal Act. Current section 785.9(a) explains the statutory provisions that eliminate from working time certain ``preliminary'' and ``postliminary'' activities performed prior to or subsequent to the workday. To incorporate this amendment, this proposed rule adds to that section the new provision that activities that are incidental to the use of an employer-provided vehicle for commuting are not considered principal activities, and are not compensable, when they meet the conditions of the amendment. Current Sec. 785.34 discusses the effect of section 4 of the Portal Act on determining whether time spent in travel is working time. This proposed rule adds a reference to the statutory conditions under which commuting in an employer-provided vehicle will not be considered part of the employee's principal activities and will not be compensable. The proposed rule also revises Sec. Sec. 785.50 and 790.3 to incorporate the 1996 amendment into the quotation of section 4 of the Portal Act. B. Youth Opportunity Wage Section 2105 of the SBJPA amended the FLSA by adding section 6(g), which provides that ``[a]ny employer may pay any employee of such employer, during the first 90 consecutive calendar days after such employee is initially employed by such employer, a wage which is not less than $4.25 an hour.'' 29 U.S.C. 206(g)(1). This subminimum wage ``shall only apply to an employee who has not attained the age of 20 years.'' 29 U.S.C. 206(g)(4). The amendment also protects current workers by prohibiting employers from taking action to displace employees, including reducing hours, wages, or employment benefits, for the purpose of hiring workers at the opportunity wage. It also states that any employer violating this subsection shall be considered to have violated the anti-discrimination provisions of section 15(a)(3) of the FLSA. 29 U.S.C. 206(g)(3). In this proposed rule, the Department adds a new subpart G to 29 CFR part 786--which will be renamed Miscellaneous Exemptions and Exclusions From Coverage--to set forth the provisions of this new youth opportunity wage. C. Minimum Wage Increase Act of 1996 Section 2105 of Title II of the SBJPA, entitled the ``Minimum Wage Increase Act of 1996,'' amended section 3(m) of the FLSA, 29 U.S.C. 203(m), by providing that In determining the wage an employer is required to pay a tipped employee, the amount paid such employee by the employee's employer shall be an amount equal to-- (1) The cash wage paid such employee which for purposes of such determination shall be not less than the cash wage required to be paid such an employee on the date of the enactment of this paragraph; and (2) An additional amount on account of the tips received by such employee which amount is equal to the difference between the wage specified in paragraph (1) and the wage in effect under section 6(a)(1). The additional amount on account of tips may not exceed the value of the tips actually received by an employee. The preceding 2 [[Page 43657]] sentences shall not apply with respect to any tipped employee unless such employee has been informed by the employer of the provisions of this subsection, and all tips received by such employee have been retained by the employee, except that this subsection shall not be construed to prohibit the pooling of tips among employees who customarily and regularly receive tips. Public Law No. 104-188, Sec. 2105(b) (1996). Prior to the 1996 amendments, section 3(m) of the FLSA required an employer to pay its tipped employees a cash wage equal to 50 percent of the minimum wage (then $4.25 an hour). See Public Law No. 101-157, Sec. 5 (1989); Public Law No. 93-259, Sec. 13(e) (1974); 29 CFR 531.50. As amended, section 3(m)(1) provides that an employer's minimum cash wage obligation to its tipped employees is the minimum cash wage required on August 20, 1996, the date of the SBJPA enactment. Thus, section 3(m)(1) established an employer's cash wage obligations to tipped employees at the pre-SBJPA amount: 50 percent of the then-minimum wage of $4.25 per hour, or $2.13 per hour. See 29 U.S.C. Sec. 203(m)(1). Subsection (2) of the 1996 amendments bases an employer's maximum allowable tip credit on a specific formula in relation to the applicable minimum wage, stating that an employer may take a tip credit equal to the difference between the required minimum cash wage specified in paragraph 3(m)(1) ($2.13) and the minimum wage (now $5.85). Thus, the maximum tip credit that an employer currently is permitted to claim is $5.85 minus $2.13, or $3.72 per hour. (Effective July 24, 2008, the minimum wage required by the FLSA will increase to $6.55 an hour, resulting in a maximum federal tip credit limited to $4.42 an hour. Effective July 24, 2009, the minimum wage required by section 6(a)(1) of the FLSA will increase to $7.25 an hour, resulting in a maximum federal tip credit limited to $5.12 an hour.) This 1996 amendment affects certain regulations in 29 CFR part 531. Current Sec. 531.50(a) quotes section 3(m) of the FLSA as it appeared before the 1996 amendments. To incorporate the 1996 amendment, this proposed rule replaces the old statutory language with the current statutory provision. Current Sec. Sec. 531.56(d), 531.59, and 531.60 refer to the pre-1996 statutory language setting the tip credit at 50 percent of the minimum wage. The proposed rule deletes or changes these references to reflect the current statutory requirements (tip credit equaling the difference between the minimum wage required by section 6(a)(1) of the FLSA and the $2.13 required cash wage). Additional changes related to tipped employees are discussed in this preamble at sections 7B and 8, infra. 3. Agricultural Workers on Water Storage/Irrigation Projects Section 105 of The Departments of Labor, Health, and Human Services, Education, and Related Agencies Appropriations Act, Public Law No. 105-78, 111 Stat. 1467 (Nov. 13, 1997), amended section 13(b)(12) of the FLSA, 29 U.S.C. 213(b)(12), which provides an overtime exemption for agricultural employees and employees employed in connection with the operation or maintenance of certain waterways used for supply and storing of water for agricultural purposes. The 1997 amendment deleted ``water for agricultural purposes'' and substituted ``water, at least 90 percent of which was ultimately delivered for agricultural purposes during the preceding calendar year.'' Thus, this amendment makes the exemption from overtime pay requirements applicable to workers on water storage and irrigation projects where at least 90 percent of the water is used for agricultural purposes, rather than where the water is used exclusively for agricultural purposes. In this proposed rule, the Department updates the regulations in 29 CFR part 780, Subpart E to incorporate the statutory amendment. Thus, proposed Sec. 780.400 correctly quotes the statute, including the amendment. Section 780.401 provides an updated general explanatory statement of the history of the exemption. Section 780.406 deletes the last sentence of the current rule, which refers to the 1966 amendments, as no longer necessary. Finally, Sec. 780.408 is updated to describe the ``at least 90 percent'' requirement for using the water for agricultural purposes. 4. Certain Volunteers at Private Non-Profit Food Banks Section 1 of the Amy Somers Volunteers at Food Banks Act, Public Law No. 105-221, 112 Stat. 1248 (Aug. 7, 1998), amended section 3(e) of the FLSA, 29 U.S.C. 203(e), by adding section (5) to provide that the term ``employee'' does not include individuals volunteering solely for humanitarian purposes at private non-profit food banks and who receive groceries from those food banks given in recognition of such individual's needs and not in exchange for such individual's services. 29 U.S.C. 203(e)(5). This proposed rule renames 29 CFR part 786 to ``Miscellaneous Exemptions and Exclusions From Coverage'' and adds Subpart H to set forth this exclusion from FLSA coverage. 5. Employees Engaged in Fire Protection Activities In 1999, Congress amended section 3 of the FLSA, 29 U.S.C. 203, by adding section (y) to define ``an employee in fire protection activities.'' This amendment states that an ``employee in fire protection activities'' means an employee, including a firefighter, paramedic, emergency medical technician, rescue worker, ambulance personnel, or hazardous material worker, who--(1) is trained in fire suppression, has the legal authority and responsibility to engage in fire suppression, and is employed by a fire department of a municipality, county, fire district, or State; and (2) is engaged in the prevention, control, and extinguishment of fires or response to emergency situations where life, property, or the environment is at risk. Public Law No. 106-151, 113 Stat. 1731 (1999); 29 U.S.C. 203(y). Such employees may be covered by the partial overtime exemption allowed by Sec. 7(k) or the overtime exemption for public agencies with fewer than five employees in fire protection activities pursuant to Sec. 13(b)(20). 29 U.S.C. 207(k); 213(b)(20). This proposed rule makes several revisions to 29 CFR part 553, Subpart C, to incorporate this amendment. In the first sentence of proposed Sec. 553.210(a), the statutory amendment language is substituted for the current four-part regulatory definition of the term ``any employee * * * in fire protection activities.'' The proposed rule also deletes the last sentence of current section 553.210(a) stating that, ``[t]he term would also include rescue and ambulance service personnel if such personnel form an integral part of the public agency's fire protection services,'' and it deletes the cross-reference to section 553.215. The ``integral part'' test for the public agency employees is no longer needed because the new statutory standards define when such rescue and ambulance personnel qualify as employees in fire protection activities. Section 553.215(a) of the current rule discusses ambulance and rescue service employees who are employees of a public agency other than a fire protection or law enforcement agency. The section 3(y) amendment, however, specifically states that one of the requirements to be an ``employee in fire protection activities'' is that the employee is employed by a fire department of a municipality, county, fire district, or State. The proposed rule, therefore, deletes section 553.215(a) [[Page 43658]] because it permits non-fire department public agencies to treat their ambulance and rescue service employees as employees engaged in fire protection activities, contrary to the new statutory conditions. This proposed rule also deletes Sec. Sec. 553.215(b) (stating that rescue service employees of hospitals and nursing homes cannot qualify for the exemption) and 553.215(c) (stating that ambulance and rescue service employees of private organizations do not come within the exemption) as unnecessary in light of the clear statutory requirement for employment by a fire department. Finally, in Sec. Sec. 553.221, 553.222, 553.223, and 553.226, the Department is substituting ``employee in fire protection activities'' or ``employees in fire protection activities,'' respectively, wherever the terms ``firefighter'' or ``firefighters'' appeared. The Department reexamined the other regulations in part 553, Subpart C, in light of the section 3(y) amendment to assess whether any other changes were appropriate. Current Sec. 553.210 characterizes as exempt work related incidental activities such as equipment maintenance, lecturing and fire prevention inspections. Current Sec. 553.210 also recognizes that employees can come within the exemption whether their status is ``trainee,'' ``probationary,'' or ``permanent,'' and regardless of their particular specialty or job title or assignment to certain support activities. The Department believes that these provisions are consistent with statutory intent and remain the appropriate interpretation of the new statutory definition and, thus, makes no further changes to section 553.210. Current section 553.212 recognizes that exempt employees may engage in some nonexempt work, such as firefighters who work for forest conservation agencies and who plant trees and perform other conservation activities unrelated to their firefighting duties during slack times. The Department reexamined this regulation, particularly in light of the court's decision in McGavock v. City of Water Valley, 452 F.3d 423 (5th Cir. 2006). That court noted that the Department had not updated its regulations since the passage of section 3(y). It found that the regulation at Sec. 553.210, defining an employee in fire protection activities, was supplanted by the amendment. It also concluded that the 20% tolerance for nonexempt work in Sec. 553.212 simply put a gloss on the pre-existing regulatory definition. Therefore, the court concluded that Sec. Sec. 553.210 and 553.212 were ``obsolete and without effect.'' 452 F.3d at 428. See also Huff v. DeKalb County, Ga., 516 F.3d 1273, 1278 (11th Cir. 2008) (agreeing that new section 3(y) is a streamlined definition that made existing provisions in Sec. Sec. 553.210 and 553.212 obsolete). Congress stated in section 3(y) that an employee must be ``engaged in the prevention, control, and extinguishment of fires or response to emergency situations where life, property, or the environment is at risk'' in order to qualify as an employee in fire protection activities. 29 U.S.C. 203(y). Congress thus defined emergency medical response work as exempt work, when performed by an employee who meets the other tests in section 3(y). This proposed rule therefore deletes Sec. 553.212 as unnecessary in light of the court decisions and statutory amendment. 6. Stock Options Excluded From the Computation of the Regular Rate The Worker Economic Opportunity Act, Public Law No. 106-202, 114 Stat. 308, enacted by Congress on May 18, 2000, amended Sec. Sec. 7(e) and 7(h) of the FLSA. 29 U.S.C. 207(e), (h). In Sec. 7(e), a new subsection (8) adds ``[a]ny value or income derived from employer- provided grants or rights provided pursuant to a stock option, stock appreciation right, or bona fide employee stock purchase program'' meeting particular criteria to the types of remuneration that are excluded from the computation of the regular rate. In Sec. 7(h), the amendment clarifies that the amounts excluded under Sec. 7(e) may not be counted toward the employer's minimum wage requirement under section 6, and that extra compensation excluded pursuant to the new subsection (8) may not be counted toward overtime pay under Sec. 7. The proposed rule incorporates the amendments made by the Worker Economic Opportunity Act by adding to the regulatory provisions which simply quote the statute in section 778.200(a) and (b). Section 778.208 also is revised simply to update from ``seven'' to ``eight'' the number of types of remuneration excluded in computing the regular rate. 7. Fair Labor Standards Act Amendments of 1974 A. Service Advisors Working for Automobile Dealerships and Boat Salespersons On April 7, 1974, Congress enacted an amendment to section 13(b)(10)(B) of the FLSA, 29 U.S.C. 213(b)(10)(B). Public Law No. 93- 259, 88 Stat. 55 (1974). This amendment added an overtime exemption for salespersons primarily engaged in selling boats (in addition to the pre-existing exemption for sellers of trailers or aircraft). This amendment also eliminated the overtime exemption for partsmen and mechanics servicing trailers or aircraft. This proposed rule revises 29 CFR part 779, Subpart D--Exemptions for Certain Retail or Service Establishments, so that the regulations implementing section 13(b)(10)(B) conform to this 1974 amendment. Section 779.371(a) is revised to reflect the amendment's addition of boat salespersons to the exemption. Proposed Sec. 779.372(a) now clarifies that salespersons primarily engaged in selling trailers, boats, or aircraft, but not partsmen or mechanics for such vehicles, are covered by the exemption; portions of Sec. 779.372(b) and (c) also are changed accordingly. Section 13(b)(10)(A) of the FLSA provides that ``any salesman, partsman, or mechanic engaged in selling or servicing automobiles, trucks or farm implements, if he is employed by a nonmanufacturing establishment primarily engaged in the business of selling such vehicles or implements to ultimate purchasers'' shall be exempt from the overtime requirements of the Act. 29 U.S.C. 213(b)(10)(A). The current regulation at 29 CFR 779.372(c)(4) states that an employee described as a service manager, service writer, service advisor, or service salesman, is not exempt under section 13(b)(10)(A). Uniform appellate and district court decisions, however, hold that service advisors are exempt under section 13(b)(10)(A) because they are ``salesmen'' who are primarily engaged in ``servicing'' automobiles. See, e.g., Walton v. Greenbrier Ford, Inc., 370 F.3d 446, 452 (4th Cir. 2004) (The current regulatory interpretation of this exemption is ``an impermissibly restrictive construction of the statute.''); Brennan v. Deel Motors, Inc., 475 F.2d 1095, 1097 (5th Cir. 1973) (Service advisors are ``functionally similar to the mechanics and partsmen who service the automobiles. All three work as an integrated unit, performing the services necessary * * * with the service salesman coordinating these specialties.''); Brennan v. North Brothers Ford, Inc., 1975 WL 1074 at *3 (E.D. Mich. 1975) (unpublished) (``The spirit of 13(b)(10) is best fulfilled by recognizing the functional similarity of service salesmen to partsmen and mechanics which are both expressly exempted.''), aff'd sub. nom. Dunlop v. North Brothers Ford, Inc., 529 F.2d 524 (6th Cir. 1976) (Table). [[Page 43659]] Based upon the court decisions, the Wage and Hour Division has adopted an enforcement position since 1987 that Wage and Hour ``will no longer deny the [overtime] exemption for such employees,'' and that the regulation would be revised. See Wage and Hour Division Field Operations Handbook (FOH) section 24L04(k). Therefore, this proposed rule changes Sec. 779.372(c), entitled ``Salesman, partsman, or mechanic,'' to follow the courts' consistent holdings that employees performing the duties typical of service advisors are within the section 13(b)(10)(A) exemption. Section 779.372(c)(1) is revised to include such an employee as a salesman primarily engaged in servicing automobiles. Section 779.372(c)(4) is rewritten to clarify that such employees qualify for the exemption. B. Tipped Employees Section 3(m) of the FLSA defines the term ``wage'' and includes conditions for taking tip credits when making wage payments to qualifying tipped employees under the FLSA. The Department's tip credit regulations were promulgated in 1967, one year after hotels and restaurants were brought under the FLSA. Section 13(e) of the Fair Labor Standards Act Amendments of 1974 amended the last sentence of section 3(m) by providing that an employer could not take a tip credit unless: (1) [its] employee has been informed by the employer of the provisions of this subsection and (2) all tips received by such employee have been retained by the employee, except that this subsection shall not be construed to prohibit the pooling of tips among employees who customarily and regularly receive tips. Public Law No. 93-259, Sec. 13(e), 88 Stat. 55. Prior notice by the employer to employees of the employer's intent to avail itself of the tip credit is a statutory requirement pursuant to the 1974 amendments. Courts have disallowed the use of the tip credit for lack of notice even ``where the employee has actually received and retained base wages and tips that together amply satisfy the minimum wage requirements,'' remarking that ``[i]f the penalty for omitting notice appears harsh, it is also true that notice is not difficult for the employer to provide.'' Reich v. Chez Robert, Inc., 28 F.3d 401, 404 (3d Cir. 1994) (citing Martin v. Tango's Restaurant, 969 F.2d 1319, 1323 (1st Cir. 1992)). Although written notice is frequently provided, it is not required to satisfy the employer's notice burden. Compare Kilgore v. Outback Steakhouse of Florida, Inc., 160 F.3d 294, 299 (6th Cir. 1998) (written notice provided to all applicants as matter of course), with Pellon v. Business Representation Int'l, Inc., 528 F. Supp. 2d 1306, 1310-11 (S.D. Fla. 2007), appeal docketed, No. 08-10133 (11th Cir. Jan. 8, 2008) (Section 3(m)'s requirement was met through verbal notice that plaintiff would be paid $2.13 plus tips, combined with prominent display of FLSA poster explaining tip credit). Additionally, while employees must be ``informed'' of the employer's use of the tip credit, the employer need not ``explain'' the tip credit. See Kilgore, 160 F.3d at 298 (``[A]n employer must provide notice to the employees, but need not necessarily `explain' the tip credit * * * `[I]nform' requires less from an employer than the word `explain.' ''); cf. Bonham v. Copper Cellar Corp., 476 F. Supp. at 101 & n.6 (``vague references to conversations about the minimum wage'' are insufficient to establish section 3(m) notice). The second provision of the 1974 amendments to section 3(m) made it clear that tipped employees must receive at least the minimum wage and must generally retain any tips received by them as gratuities for services performed. An employer, however, can take advantage of a ``tip credit'' to offset a portion of its minimum wage obligation. Prior to the 1974 amendments, the compensation of tipped employees was often a matter of agreement. Tipped employees could agree, for example, that an employer was only obligated to pay cash wages when an employee's tips were less than the minimum wage, or that the employee's tips would be turned over to the employer, who could then use the tips to pay the minimum wage. See Usery v. Emersons Ltd., 1976 WL 1668, *2 (E.D. Va. 1976), vacated and remanded on other grounds sub. nom. Marshall v. Emersons Ltd., 593 F.2d 565 (4th Cir. 1979). The 1974 amendments to section 3(m) were intended to prohibit such agreements. See S. Rep. No. 93-690, at 43 (1974) (``The latter provision is added to make clear the original Congressional intent that an employer could not use the tips of a `tipped employee' to satisfy more than 50 percent of the Act's applicable minimum wage.''). The Department's current regulations, which were in effect prior to the 1974 amendments and allowed an employer to require employees to turn over all their tips to the employer, were therefore invalidated by the amendment to the extent that turning tips over to the employer effectively cuts into the minimum wage. Under the 1974 amendments to section 3(m), an employer's ability to utilize an employee's tips to satisfy any portion of the employer's minimum wage obligation was limited to taking a credit against the employee's tips of up to 50 percent of that obligation. Section 3(m) provides the only method by which an employer may use tips received by an employee to satisfy the employer's minimum wage obligation. An employer's only options under section 3(m) are to take a credit against the employee's tips of up to the statutory differential, or to pay the entire minimum wage directly. See Wage and Hour Opinion Letter WH-536, 1989 WL 610348 (October 26, 1989) (defining when an employer does not claim a tip credit as when the employer does not retain any tips and pays the employee the minimum wage). Thus, in a situation in which an employee earns $10 an hour in tips and the employer pays $2.13 an hour in cash wages and claims the statutory maximum as a tip credit, the employee has received only the minimum wage under section 3(m). (Under section 3(m), the ``wage'' of a tipped employee equals the sum of the cash wage paid by the employer and the amount it claimed as a tip credit.) The amount of tips the employee received in excess of the tip credit are not considered ``wages'' paid by the employer and any deductions from the employee's tips made by the employer would therefore result in a violation of the employer's minimum wage obligation. If, however, the employer paid the employee a direct wage in excess of the minimum wage--and thus did not claim a credit against any portion of the employee's tips--the employer would be able to make deductions so long as they did not reduce the direct wage payment below the minimum wage. See Wage and Hour Opinion Letter WH-536, 1989 WL 610348 (October 26, 1989). In such a situation, the deduction would be viewed as coming from the employer's wage payment that exceeds the minimum wage. The proposed rule updates the regulations to incorporate the 1974 amendments, the legislative history, subsequent court decisions, and the Department's interpretations. Sections 531.52, 531.55(a), 531.55(b), and 531.59 eliminate references to employment agreements providing either that tips are the property of the employer or that employees will turn tips over to their employers, and clarify that the availability of the tip credit provided by section 3(m) requires that all tips [[Page 43660]] received must be paid out to tipped employees in accordance with the 1974 amendments. Section 531.55(a), which describes compulsory service charges, also is updated by changing the example of such a charge from 10 percent to 15 percent to reflect more current customary industry practices. The 1974 amendments also clarified that section 3(m)'s statement that employees must retain their tips does not preclude the practice of tip pooling ``among employees who customarily and regularly receive tips.'' 29 U.S.C. 203(m). The Department's regulation on the subject provides that ``the amounts received and retained by each individual [through a tip pooling arrangement] as his own are counted as his tips for purposes of the Act.'' 29 CFR 531.54. Wage and Hour interpreted the tip pooling clause more fully in opinion letters and in its FOH. The FOH provides, for example, that a tip pooling arrangement cannot require employees to contribute a greater percentage of their tips to the tip pool than is ``customary and reasonable.'' FOH section 30d04(b). The agency expanded upon this position, in its opinion letters and in litigation, that ``customary and reasonable'' equates to 15 percent of an employee's tips or two percent of daily gross sales. See, e.g., Wage and Hour Opinion Letter WH-468, 1978 WL 51429 (Sept. 5, 1978). Several courts have rejected the agency's maximum contribution percentages, however, ``because neither the statute nor the regulations mention [the requirement stated in the agency interpretation] and the opinion letters do not explain the statutory source for the limitation that they create.'' Kilgore v. Outback Steakhouse of Fla., Inc., 160 F.3d 294, 302-03 (6th Cir. 1998); see Davis v. B&S, Inc., 38 F. Supp. 2d 707, 718 n.16 (N.D. Ind. 1998) (citing Dole v. Continental Cuisine, Inc., 751 F. Supp. 799, 803 (E.D. Ark. 1990) (``The Court can find no statutory or regulatory authority for the Secretary's opinion [articulated in an opinion letter] that contributions in excess of 15% of tips or 2% of daily gross sales are excessive.'')). Based on these court decisions and the unequivocal statutory language, the proposed rule updates Sec. 531.54 to clarify that section 3(m) of the FLSA does not impose a maximum tip pool contribution percentage. However, the proposed rule states that the employer must inform each employee of the required tip pool contribution, and an employee's participation in a tip pool cannot bring the employee's wages below the minimum wage. The 1974 amendments also revised another aspect of section 3(m). Prior to the 1974 amendments, section 3(m) of the FLSA provided that an employee could petition the Wage and Hour Administrator to review the tip credit claimed by an employer. See Public Law No. 89-601, 80 Stat. 830 (1966) (``[I]n the case of an employee who (either himself or acting through his representative) shows to the satisfaction of the Secretary that the actual amount of tips received by him was less than the amount determined by the employer as the amount by which the wage paid him was deemed to be increased * * * the amount paid such employee by his employer shall be deemed to have been increased by such lesser amount.''). The 1974 amendments eliminated the review clause to clarify that the employer, not the employee, bears the ultimate burden of proving ``the amount of tip credit, if any, [he] is entitled to claim.'' S. Rep. No. 93-690, at 43. Two outdated regulatory provisions promulgated in 1967, however, still purport to permit petitions to the Wage and Hour Administrator for tip credit review despite the fact that the statute no longer provides for this review. See 29 CFR 531.7, 531.59. Consistent with the 1974 amendments, this proposed rule deletes section 531.7, which permits employees to petition the Wage and Hour Administrator for tip credit review. References to the Administrator's review in section 531.59 are also deleted, and the language is updated to reflect the burden on the employer to prove the amount of the tip credit to which it is entitled. 8. Fair Labor Standards Act Amendments of 1977 On November 1, 1977, Congress amended section 3(t) of the FLSA, 29 U.S.C. 203(t). Public Law No. 95-151, Sec. 3(a), 91 Stat. 1245. Section 3(t) of the FLSA defines the phrase ``tipped employee.'' Prior to the 1977 amendment, the definition encompassed ``any employee engaged in an occupation in which he customarily and regularly receives more than $20 a month in tips.'' The 1977 amendment raised the threshold in section 3(t) to $30 a month in tips. To reflect the 1977 amendment, this proposed rule changes the references in 29 CFR 531.50(b), 531.51, 531.56(a)-(e), 531.57, and 531.58 from $20 to $30. 9. Meal Credit Under Section 3(m) The proposed rule further amends Sec. 531.30 to incorporate Wage and Hour's longstanding enforcement position regarding the voluntary acceptance of meals. A ``wage'' paid pursuant to section 3(m) of the FLSA may include ``the reasonable cost * * * to the employer of furnishing * * * board, lodging, or other facilities * * * customarily furnished by such employer to his employees.'' 29 U.S.C. 203(m). ``Facilities'' include employer-provided meals. See 29 CFR 531.32. The Department's regulation at 29 CFR 531.30, however, provides that an employer's ability to take credit for a facility is limited to those instances where an employee's acceptance was ``voluntary and uncoerced.'' In other words, an employer could not take a wage credit for employees who did not choose to accept the meal. After a number of courts rejected the agency's position on this point with regard to credit for meals, the agency adopted an enforcement position providing that an employer can take a meal credit even if an employee does not voluntarily accept the meal. See FOH section 30c09(b) (``WH no longer enforces the `voluntary' provision with respect to meals.''); see also Davis Bros., Inc. v. Donovan, 700 F.2d 1368, 1370 (11th Cir. 1983); Donovan v. Miller Properties, Inc., 711 F.2d 49, 50 (5th Cir. 1983). Thus, under the agency's current enforcement policy articulated in the FOH, an employer may require an employee to accept a meal provided by the employer as a condition of employment, and may take credit for the actual cost of that meal even if the employee's acceptance is not voluntary. The proposed rule amends 29 CFR 531.30 to reflect previous court decisions and the agency's current enforcement posture on meal credits. 10. Section 7(o) Compensatory Time Off Section 7 of the FLSA requires that a covered employee receive compensation for hours worked in excess of 40 in a workweek at a rate not less than one and one-half times the regular rate of pay at which the employee is employed. 29 U.S.C. 207(a). In 1985, subsequent to the U.S. Supreme Court's decision in Garcia v. San Antonio Metropolitan Transit Authority, 469 U.S. 528 (1985), which held that the FLSA may be constitutionally applied to state and local governments, Congress added section 7(o), 29 U.S.C. 207(o), to the FLSA to permit public agencies to grant employees compensatory time off in lieu of cash overtime compensation pursuant to an agreement with employees or their representatives. The purpose of this exception to the Act's usual requirement of cash overtime pay was ``to provide flexibility to state and local government employers and an [[Page 43661]] element of choice to their employees regarding compensation for statutory overtime hours.'' H.R. Rep. No. 331, 99th Cong., 1st Sess. 19 (1985). Section 7(o) provides a detailed scheme for the accrual and use of compensatory time off. Subsection 7(o)(1) authorizes the provision of compensatory time off in lieu of overtime pay. Subsection 7(o)(2) specifies how a public employer creates a compensatory time off plan. Subsection 7(o)(3) establishes limits for the amount of compensatory time off that an employee may accrue. Section 7(o)(4) provides the requirements for cashing out compensatory time upon an employee's termination. Section 7(o)(5) governs a public employee's use of accrued compensatory leave. That section states: An employee of a public agency which is a State, political subdivision of a State, or an interstate governmental agency--(A) who has accrued compensatory time off authorized to be provided under paragraph (1), and (B) who has requested the use of such compensatory time, shall be permitted by the employee's employer to use such time within a reasonable period after making the request if the use of the compensatory time does not unduly disrupt the operations of the public agency. 29 U.S.C. 207(o)(5)(A), (B). In 1987, after notice and comment, the Department issued final regulations implementing section 7(o) (29 CFR 553.20-.28). Section 553.25 of the regulations implements section 7(o)(5)'s requirements regarding the use of compensatory time off. Section 553.25(c) provides: (1) Whether a request to use compensatory time has been granted within a ``reasonable period'' will be determined by considering the customary work practices within the agency based on the facts and circumstances in each case. Such practices include, but are not limited to (a) the normal schedule of work, (b) anticipated peak workloads based on past experience, (c) emergency requirements for staff and services, and (d) the availability of qualified substitute staff. (2) The use of compensatory time in lieu of cash payment for overtime must be pursuant to some form of agreement or understanding between the employers and the employee (or the representative of the employee) reached prior to the performance of the work. (See Sec. 553.23). To the extent that the []conditions under which an employee can take compensatory time off are contained in an agreement or understanding as defined in Sec. 553.23, the terms of such agreement or understanding will govern the meaning of ``reasonable period''. Section 553.25(d) states: When an employer receives a request for compensatory time off, it shall be honored unless to do so would be ``unduly disruptive'' to the agency's operations. Mere inconvenience to the employer is an insufficient basis for denial of a request for compensatory time off. (See H. Rep. 99-331, p. 23.) For an agency to turn down a request from an employee for compensatory time off requires that it should reasonably and in good faith anticipate that it would impose an unreasonable burden on the agency's ability to provide services of acceptable quality and quantity for the public during the time requested without the use of the employee's services. In recent years, a number of courts have examined the proper interpretation of section 7(o)(5)(B)'s ``reasonable period'' requirement with regard to whether an employer must allow an employee to take off the specific days that the employee requests unless that time off would cause an undue disruption. In Mortensen v. County of Sacramento, 368 F.3d 1082 (9th Cir. 2004), the court held that under section 7(o)(5)(B), a public agency may deny its employees the right to use accrued compensatory time off on the specific days they request, without establishing that such use of compensatory time would ``unduly disrupt the operations of the public agency.'' The court relied upon the statutory language providing that an employee who has requested the use of compensatory time ``shall be permitted * * * to use such time within a reasonable period after making the request.'' 29 U.S.C. 207(o)(5)(B). The court held that this language unambiguously states that once an employee requests compensatory time off, the employer must allow the employee to use the time within a reasonable period after the request and, thus, it does not require the employer to grant the time off on the specific days requested. In the court's opinion, section 7(o)(5)(B)'s ``unduly disrupt'' clause merely indicates the condition that releases an employer from the obligation to permit the use of compensatory time within a ``reasonable period'' after it is requested. Because the court found no ambiguity in the statute, it declined to defer to the Department's regulation at 29 CFR 553.25(d). Accord Scott v. City of New York, 340 F. Supp. 2d 371, 380 (S.D.N.Y. 2004). Similarly, in Houston Police Officers Union v. City of Houston, 330 F.3d 298 (5th Cir.), cert. denied, 540 U.S. 879 (2003), the court held that the plain language of section 207(o)(5)(B) does not require a public agency to grant compensatory time off on the date specifically requested, but instead requires that the agency permit the leave within a reasonable period after the employee requests its use. The court stated that ``mandating a `reasonable period' for use of comp time is different from mandating the employee's chosen dates. The language offers a span of time to the employer, the beginning of which is the date of the employee's request.'' 330 F.3d at 303. The court noted that if granting the request would unduly disrupt operations, the public agency is released from the previously imposed requirement. Because the court deemed the statutory language unambiguous, it held that deference to the Department's regulation would be inappropriate. Moreover, the court stated that even if the statute were ambiguous, the regulation at section 553.25(d) ``simply does not address whether the statute mandates an employee's specifically requested dates for comp time.'' 330 F.3d at 304. The court (330 F.3d at 304-05) also refused to defer to the Department's amicus curiae brief filed in DeBraska v. City of Milwaukee, 131 F. Supp. 2d 1032 (E.D. Wis. 2000).\1\ --------------------------------------------------------------------------- \1\ In contrast to Houston Police Officers Union, the district court in DeBraska v. City of Milwaukee, 131 F. Supp. 2d at 1034, found that the statute was ``somewhat ambiguous.'' The court held that section 7(o)(5)(B) establishes that if an employee gives reasonable notice of a request for compensatory time, the specific days requested must be granted unless the employer demonstrates that the leave would unduly disrupt the employer's services to the public. The court thus agreed with the interpretation of section 7(o)(5) presented in the Department's amicus curiae brief, and it concluded that the current regulations support this view, because Sec. 553.25(d) provides that in order to deny a compensatory leave request an agency must believe that granting the leave would ``impose an unreasonable burden on the agency's ability to provide services of acceptable quality and quantity for the public during the time requested[.]'' (Emphasis added). The court stated that granting time off on an alternate date would be inconsistent with this phrase. --------------------------------------------------------------------------- In Aiken v. City of Memphis, 190 F.3d 753 (6th Cir. 1999), cert. denied, 528 U.S. 1157 (2000), the court held that the plaintiffs-police officers' collective bargaining agreement with the City of Memphis permitted the City to deny the specific day requested for the use of compensatory time without a showing that such use would unduly disrupt its operations. Under the agreement, the City required police officers requesting compensatory time to sign the precinct's ``comp time'' log book within 30 days of the requested day off. Once the commanding officer determined that additional requests for a particular day would adversely affect the functioning of the unit, no additional requests for the use of compensatory time on that day were allowed. The plaintiffs-police officers argued that the City's practice of denying officers the use of compensatory time off on a particular day violated section 7(o)(5)(B) because the City denied the leave without satisfying the ``unduly [[Page 43662]] disrupt'' standard. The court rejected the argument on the ground that it ``completely ignores the phrase `reasonable period,' which the Act gives the parties the freedom to define.'' 190 F.3d at 756 (citations omitted). The court noted that the regulations provide that to the extent that the parties' agreement specifies ``the conditions under which an employee can take compensatory time off * * * the terms of such agreement or understanding will govern the meaning of `reasonable period.' '' 190 F.3d at 756-57 (quoting 29 CFR 553.25(c)(2)). The court reasoned that the parties had agreed that ``the reasonable period for requesting the use of banked compensatory time begins thirty days prior to the day in question and ends when the number of officers requesting the use of compensatory time on the given date would bring the precinct's staffing levels to the minimum level necessary for efficient operation.'' 190 F.3d at 757. Therefore, on this basis, the court upheld the district court's determination that the City had not violated section 7(o)(5)(B). See Beck v. City of Cleveland, 390 F.3d 912 (6th Cir. 2004), cert. denied, 125 S. Ct. 2930 (2005) (Aiken involved the ``reasonable period'' clause of section 7(o)(5)(B)). The appellate decisions uniformly read the statutory language unambiguously to state that once an employee requests compensatory time off, the employer has a reasonable period of time to allow the employee to use the time, unless doing so would be unduly disruptive. The Department proposes to revise the current rule to adhere to the appellate court rulings cited above. Proposed Sec. 553.25(c) adds a sentence that states that section 7(o)(5)(B) does not require a public agency to allow the use of compensatory time on the day specifically requested, but only requires that the agency permit the use of the time within a reasonable period after the employee makes the request, unless the use would unduly disrupt the agency's operations. Additionally, the phrase ``within a reasonable period after the request'' has been added to the final sentence of proposed Sec. 553.25(d) and the phrase ``during the time requested'' has been replaced with ``during the time off'' to clarify the employer's obligation. 11. Fluctuating Workweek Method of Computing Overtime Under 29 CFR 778.114 The proposed rule would also clarify the Department's regulation at 29 CFR 778.114 addressing the fluctuating workweek method of computing overtime compensation for salaried nonexempt employees. The current regulation provides that an employer may use the fluctuating workweek method for computing half-time overtime compensation if an employee works fluctuating hours from week to week and receives, pursuant to an understanding with the employer, a fixed salary as straight-time compensation ``(apart from overtime premiums)'' for whatever hours the employee is called upon to work in a workweek, whether few or many. In such cases, an employer satisfies the overtime pay requirement of section 7(a) of the FLSA if it compensates the employee, in addition to the salary amount, at least one-half of the regular rate of pay for the hours worked in excess of 40 hours in each workweek. Because the employee's hours of work fluctuate from week to week, the regular rate must be determined separately each week based on the number of hours actually worked each week. The payment of additional bonus supplements and premium payments to employees compensated under the fluctuating workweek method has presented challenges to both employers and the courts in applying the current regulations. The proposed regulation provides that bona fide bonus or premium payments do not invalidate the fluctuating workweek method of compensation, but that such payments (as well as ``overtime premiums'') must be included in the calculation of the regular rate unless they are excluded by FLSA sections 7(e)(1)-(8). The proposal also adds an example to Sec. 778.114(b) to illustrate these principles where an employer pays an employee a nightshift differential in addition to a fixed salary. Paying employees bonus or premium payments for certain activities such as working undesirable hours is a common and beneficial practice for employees. Moreover, the Department's proposed clarification is consistent with the Supreme Court's decision in Overnight Motor Transportation Co. v. Missel, 316 U.S. 572 (1942), on which the existing regulation is patterned. That case held that, where a nonexempt employee had received only a fixed weekly salary (with no additional overtime premium pay) for working variable irregular hours that regularly exceeded 40 per week and fluctuated from week to week, the employer was required to retroactively pay an additional 50% of the employee's regular rate of pay multiplied by the overtime hours worked to satisfy the FLSA's time and a half overtime pay requirement. Id. at 573-74, 580-81. The quotient of the weekly wage divided by the number of hours actually worked each week, including the overtime hours, determined the ``regular rate at which [the] employee [was] employed'' under the fixed salary arrangement. Id. at 580. The Department's proposed clarification would eliminate any disincentive for employers to pay additional bona fide bonus or premium payments. IV. Paperwork Reduction Act This rule does not impose new information collection requirements for purposes of the Paperwork Reduction Act of 1995, 44 U.S.C. 3501 et seq. V. Executive Order 12866; Small Business Regulatory Enforcement Fairness Act; Regulatory Flexibility This proposed rule is not economically significant within the meaning of Executive Order 12866, or a ``major rule'' under the Unfunded Mandates Reform Act or Section 801 of the Small Business Regulatory Enforcement Fairness Act. As discussed previously in this preamble, over the years, Congress has amended the FLSA to refine or to add to exemptions and to clarify the minimum wage and overtime pay requirements. However, in many cases, the Department of Labor has not revised the FLSA regulations to comport with these statutory changes. The Department believes that the existing outdated regulatory provisions may cause confusion within the regulated community resulting in inadvertent violations and the costs of corrective compliance measures to remedy them. The Department has determined that the proposed changes will not result in any additional compliance costs for regulated entities because the current compliance obligations derive from current law and not the outdated regulatory provisions that have been superseded years ago