United States: Aircraft Pilots Status Under New Overtime Regulations

The U. S. Department of Labor (DOL) on March 28, 2003, released proposed rule changes to the Fair Labor Standards Act of 1938 (FLSA) for public comment.

During this time period the Air Line Pilots Association (ALPA) and the Allied Pilots Association (APA), in separate but distinct comments, outlined their respective positions opposing any change in the department’s August 4, 2000, Administrative Review Board ruling on the non-exempt status of pilots, under the Service Contract Act. ALPA and APA’s official comments were submitted to DOL, on June 27, 2003.

Despite fierce political controversy, accompanied by a vigorous debate in the U.S. Congress and the media on April 20, 2004, the DOL announced its final regulations governing overtime eligibility for "white collar" workers pursuant to the FLSA. The DOL also unveiled a new website, titled "FairPay" (found at www.dol.gov/esa/regs/compliance/whd/fairpay/main.htm), to help explain the changes. The full text of the regulations was published on April 23, 2004 in the Federal Register. A complete copy of those regulations may be found at http://www.access.gpo.gov/su_docs/fedreg/a040423c.html under the Wage and Hour Division.

Under the new regulations the FLSA’s "white collar" exemption rule increases the salary floor under which employees must be paid overtime. Those earning $455 per week (the equivalent of $23,660 per year) or less are now automatically entitled to time-and-a-half pay for any hours worked over 40 hours per week.

In addition, Section 541.601 in the final regulations states:

Therefore, highly compensated employees such as pilots, who earn at least $100,000, may be exempt and not entitled to overtime pay.

One controversial area in the old exemption regulations was the "duties test." In the new rules the "duties test" is simplified and the so-called "long tests" for lower paid employees have been deleted. This leaves one standard test for each category of exemption. Historically, these test provisions have proven to be the catalyst for most FLSA litigation.

The "discretion and independent judgment" requirement for administrative exemption was retained. The confusion and discussion concerning the boundaries of that requirement will likely continue.

Confusion also existed under prior regulations as to how pilots should be classified. The DOL, in an opinion letter dated, January 20, 1975, under the former regulations determined that helicopter pilots, are non-exempt and are entitled to overtime pay. Similarly the court in Ragnone v. Belo Corp., 131 F. Supp. 2d 1189, (D. Ore. 2001), applying the former regulations, found a helicopter pilot was not exempt and, therefore entitled to overtime pay. However, earlier this year in Kitty Hawk Air Cargo, Inc. v. Chao, 304 F.Supp.2d 897, (N.D. Tex. 2004) (Service Contract Act case), the court applied the old regulations and found Kitty Hawk’s pilots to be exempt and not entitled to overtime pay. Previously the court in Paul v. Petroleum Equipment Tools Co., 708 F.2d 168 (5^th Cir. 1983), also applying the former regulations, found a company airplane pilot to be exempt under the learned professional exemption and not entitled to overtime pay. Confused yet?

In the face of the conflicting court rulings and the lack of record evidence on the standard education requirements for various pilots, the DOL did not modify its position concerning pilots in the final regulations. In its preamble to the final regulations the DOL stated:

Bottom line, the DOL currently considers commercial airline pilots, as exempt employees not entitled to overtime. However, it is the DOL’s position that other pilots, such as corporate jet pilots, are non-exempt under 13(a)(1) and are entitled to overtime pay.

In section 541.4, the FLSA establishes minimum standards that may be exceeded, but cannot be waived or reduced. Employers may provide these standards on their own or through a collective bargaining agreement. See Brooklyn Savings Bank v. O’Neil, 324 U.S. 697, 706 (1945) and NLRB v. R&H Coal Co., 992 F2d 46 (4^th Cir. 1993). Nothing in the FLSA relieves an employer from its contractual obligation under a collective bargaining agreement.

In a unique move, out of concern for how the final federal overtime regulations may affect Illinois residents, Governor Rod Blagojevich (D) signed state legislation on April 2, 2004 exempting Illinois from federal overtime rules; the Governor took this action prior to their actual release. Federal law provides that if a state or local law establishes a higher standard than the FLSA, the higher standard applies. See Section 18 of the FLSA, 29 U.S.C. § 218.

The final regulations take effect on August 23, 2004. With only a few short months to implementation, employers may wish to look at non-supervisory employees classified as exempt in the administrative and professional categories. Of all employees, these are at highest risk of being misclassified under the new regulations.

A small chance exists that FLSA’s regulations could be derailed under the Congressional Review Act. That Act gives Congress 60 session days after the April 23, 2004 publication of the final regulations to overturn them. (Congress used the Act in 2001 to overturn the Clinton Administration’s ergonomics regulations.) Congress needs a simple majority vote of both House and Senate to rescind the final regulations. If that vote did occur, President Bush would likely veto the action. The Senate would then need 67 votes (a two-thirds majority) to overturn his veto. An override vote appears unlikely given the current make-up of the Senate.

Short of overturning the proposed regulations, the Senate initiated other means to modify the impact of the impending changes. In fact, that process began on May 4^th, 2004, when Sen. Judd Gregg, R-N.H., introduced an amendment that passed on a 99-0 vote, which would preserve the current regulatory overtime status for 55 occupations or job classifications. Then, Sen. Tom Harkin, D. Iowa, introduced an amendment that passed on a 52-47 vote, which would allow only the increased salary requirements from the new final regulations to be enforced, while preserving the previous overtime regulations. Both amendments were offered as riders to an unrelated tax bill (S. 1637). Now the issues move to the House for further consideration. The overtime regulations may very well become an issue in the upcoming presidential election.

U.S. Secretary of Labor Elaine L. Chao on April 27, 2004, named a new enforcement task force within the Wage and Hour division of the DOL to, as she puts it, "maximize" worker’s rights under the final regulations. Non-exempt employees may file complaints concerning overtime pay with the DOL either by mail or in person at any WHD District Office. DOL indicates that its investigators are discreet and will seek permission from the complainant to use their name if required during an investigation. Additional information concerning complaints may be found at http://www.dol.gov/esa/regs/compliance/whd/fairpay/complaint.htm or by contacting the WHD toll-free between the hours of 8 a.m. to 5 p.m., in your local time zone at (866) 487-9243.