Earlier this fall, the New Jersey Department of Labor and Workforce Development (NJDOL) adopted regulations designed to align the New Jersey exemptions from overtime for executive, administrative, professional, and outside sales persons with the "white collar" overtime exemption regulations of the federal Fair Labor Standards Act (FLSA). This welcome change was designed to provide New Jersey employers with consistency and predictability in this often-litigated area of law. It was achieved by repealing New Jersey’s applicable regulations and adopting in their stead N.J.A.C. Section 12:56-7.2, which incorporates the white collar exemptions contained in 29 CFR Part 541 of the FLSA.

Unfortunately, this regulatory change creates a new source of potential exposure for employers. The repealed New Jersey regulations included an exemption for certain commissioned inside sales personnel, while the federal analogue is housed, not with the white collar exemption regulations of 29 CFR Part 541, but in another regulatory section altogether. This resulted in the elimination of the New Jersey inside sales exemption. The NJDOL has acknowledged this as an "unintended consequence" of this regulatory action, and will be posting proposed regulations to reinstate the inside sales exemption to New Jersey law in the November 21, 2011, New Jersey Register.

Until the exemption is reinstated, however, New Jersey employers are exposed to potential overtime claims by previously exempt commissioned sales employees. Given the NJDOL’s position, it is unlikely to take action against employers with respect to previously exempt inside sales representatives. However, such employees may take advantage of the situation via private lawsuits.

Employers should take steps to minimize the risk of potential private overtime actions. Thus, employers may want to consider limiting the hours worked by their inside sales force to no more than 40 per week. Those who work more than 40 hours per week are likely entitled to be paid overtime compensation. In assessing risk and liability, employers should look backward, to consider the potentially unpaid overtime that has accrued since the rules took effect on September 6, as well as forward.

Ballard Spahr’s Labor and Employment attorneys are available to assist employers in navigating the pitfalls created by the new rules. For more information, please contact Patricia A. Smith at 856.873.5521 or smithpa@ballardspahr.com, Amy L. Bashore at 856.761.3402 or bashorea@ballardspahr.com, or the member of the Labor and Employment Group with whom you work.

Copyright © 2011 by Ballard Spahr LLP.
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