When hiring, many employers do not give proper consideration to whether newly hired employees should be classified as “exempt” employees who by law are not entitled to overtime pay for hours worked in excess of 40 hours in any workweek, or “nonexempt” employees who are entitled to overtime pay. A failure to properly apply the legal criteria for employee classification can be a costly oversight for employers.

The federal Fair Labor Standards Act (“FLSA”) mandates that employees be paid on an hourly basis of at least the federal minimum wage, currently $7.25. States and municipalities are free to enact higher minimum wage rates. New Jersey recently passed legislation that will progressively increase the current $8.85 per hour minimum wage to $15.00.

The FLSA further mandates that employees be paid at an overtime rate of not less than 1 ½ times the employee’s regular rate for each hour of work time in excess of 40 hours in any one workweek unless the employee qualifies for one of the exemptions from these overtime requirements set forth in the statute. So how does an employer determine the proper classification of an employee as either nonexempt or exempt? Unfortunately, there are no bright-line rules an employer can rely upon in making these determinations, and the employee’s job responsibilities and the employer’s control over the employee largely dictate the proper classification under the FLSA. However, the statue specifies the criteria that must be met if the employer intends to avail itself to one of the three principal exemptions set forth in the statute: i) the Executive exemption; ii) the Administrative exemption; and the Learned Professional exemption. These requirements will be discussed below, as well as certain other exemption classifications that are available under the FLSA Thankfully, New Jersey has adopted the general same criteria for determining an employee’s exempt classification under state law.

As yet another consequence of the #metoo movement, the New Jersey Legislature has passed legislation aimed at prohibiting employers from including certain waiver provisions and non-disclosure clauses routinely found in employment agreements. Senate Bill No. 121 (“the Bill”) , which is expected to be signed by signed by the Governor, will bring about a sea change for employers on several fronts.

The Ban on Waiver of Rights Under the LAD: Until now, employers were free to enter into agreements with employees to waive rights to jury trial and arbitrate all employment-related claims, including claims under the New Jersey Law Against Discrimination (“LAD”). In recent years New Jersey courts have declined to enforce individual arbitration agreements unless the employer agrees to preserve certain procedural and substantive rights, such as statutory rights to punitive damages and attorney fees, the full benefit of the statute of limitations period, and the absorption of the costs of arbitration by the employer. Nevertheless, properly crafted waivers and arbitration agreements were enforced by the courts despite the employee’s surrender the right to a jury trial in a judicial or arbitral forum.

Under the Bill, a provision “in any employment contract that waives any substantive or procedural right or remedy relating to a claim of discrimination, retaliation or harassment shall be deemed against public policy and unenforceable.” Moreover, the Bill bars any prospective waiver of any right or remedy under the LAD or any other state statute. Whereas the rights conferred by the LAD include a jury trial, the Bill effectively prohibits an employer from entering into any agreement i) to waive a trial by jury of LAD claims in a judicial forum, or ii) to arbitrate LAD claims which necessarily dispenses with a jury. At the very least, employers may be required to exclude claims for discrimination, retaliation and harassment from arbitration agreements. No surprisingly, these mandates do not apply to collective bargaining agreements.