In November 2020, the Colorado Department of Labor and Employment (CDLE) adopted Colorado Overtime and Minimum Pay Standards Order (COMPS) # 37, which came into effect on January 1, 2021. COMPS # 37, like its predecessors, has outlines the requirements for employees to qualify for exemption from Colorado’s overtime and minimum wage requirements. Among other things, COMPS # 37 clarified a point that employers have long struggled with: Colorado’s requirement that an employee “serve directly.”A” framework “to benefit from the administrative exemption.
COMPS # 37 Rule 2.2.1 changed the relevant exemption wording from “the executive “to”a executive” [emphasis added], clarifying that an employee does not need to serve the executive to be eligible for the administrative exemption, as long as the employee and the executive they serve (1) “regularly exercise independent judgment and discretion in matters of importance âand (2) haveâ a primary duty of a non-manual nature and directly related to management policies or general business operations â.
This revision, in fact, gave many employers peace of mind knowing that their exemptions were valid for administrative employees working for any “executive”, not just company presidents or general managers. Logically, many employers have turned to very next rule in COMPS # 37 – Rule 2.2.2 – for guidance on the definition of “executive”, which (unchanged from previous orders) provides that the “executive” exemption covers salaried employees who supervise the work of at least two full-time employees (with at least 50 percent of the executive’s time devoted to supervisory duties) and have the authority to hire and fire, or at least recommend such action.
Unfortunately, that confidence may have been misplaced. On July 12, 2021, the CDLE published Interpretation Notice and Formal Notice (INFO) # 1A, which is supposed to clarify that
while Rule 2.2.2 defines the term “executive” for the purpose of exemption to include lower to middle level managers who supervise two or more employees … these lower level managers are not the kind of upper level managers that rule 2.2.1 “administrative” the exemption contemplates. Therefore, an administrative employee who âdirectly servesâ lower level managers would not qualify for the exemption.
This new interpretation creates a gray area as deep as the Black Canyon of the Gunnison. While the interpretation gives employers some basis to be reasonably confident that senior managers will be able to support the administrative exemption for their direct reports, below the C-suite level, such exemptions may be at risk.
The CDLE also takes a position in INFO # 1A that, unlike the federal administrative exemption, the consultation duties of an employer’s clients with regard to their management or business operations are not exempt from administrative tasks. As with the new definition of the term âexecutiveâ in the guide, there is nothing in COMPS # 37 that specifically provides for such a distinction. Instead, the CDLE appears to rely heavily on its removal from COMPS # 37 of an incorporation by reference of the Fair Labor Standards Act (FLSA) and the agency’s addition of language indicating that the provisions of the COMPS govern in all respects, independently of any analogous law. .
Oddly enough, while INFO # 1A shows a considerable effort to tighten the administrative exemption, it seems to relax some requirements for the executive exemption. More specifically, it provides that the requirement of COMPS # 37 that a manager “supervises the work of at least two full-time employees’ can be satisfied by the supervision of the equivalent two full-time employees, so that “an employee who supervises four employees each working 20 hours per week meets this requirement.” This clarification is in line with FLSA regulations (INFO # 1A even quotes the relevant United States Department of Labor (DOL) fact sheet), which is a surprising approach given the efforts of the CDLE elsewhere. to move its COMPS interpretation away from that of its federal counterpart. The potential effect of these clarifications is even stranger, as a low-level manager with little authority beyond the supervision of a few part-time workers would likely be exempt under the executive exemption, while A sophisticated advisor to a regional manager, with strong authority to advise clients regarding their business activities, may not meet the requirements of the administrative exemption.
Finally, the new direction in INFO # 1A provides at least one troubling example of how to administer exemptions that could lead employers astray. Specifically, the guidelines suggest that a restaurant chef may sometimes qualify for the executive exemption, but “if the chef’s duties varied and on some weeks he simply cooked, with little interaction with subordinate employees. â¦ the head chef would not qualify as an exempt supervisor during those weeks. ” (I underline.)
It is strange that the CDLE would cite as the authority for this proposal a decision by the 2019 Colorado Division of Labor Standards and Statistics Hearing Officer who actually found such a chef. be exempt. In addition, the guidelines appear to encourage employers to engage in weekly assessments of whether employees’ tasks meet their exemptions and, potentially, to pay them as exempt one week and non-exempt the following week. While performing regular audits of exempt positions may be good practice, switching between exempt and non-exempt treatment could prove impractical and jeopardize an otherwise valid exemption.
In summary, INFO # 1A represents another compliance challenge for Centennial State employers, and a great reason to question whether employees are meeting these exacting standards.