By Kristen M. Kraus – Partner
Perhaps one of the most confusing and complex areas of employment law deals with the payment of overtime.
Most attorneys and even lay people understand that an employer is required to pay an employee overtime compensation at a rate of one and one-half (1-1/2) times the employee’s regular hourly rate for all hours worked over forty (40) in a given work week.
However, the confusion occurs in trying to understand which employees are exempt versus non-exempt.
The Fair Labor Standards Act
The Fair Labor Standards Act of 1938 provides for the payment of overtime compensation. It also establishes a minimum wage and record-keeping standards for employees that all employers must abide by.
Employers who fail to comply with the provisions of the FLSA risk civil penalties including the payment of unpaid wages liquidated damages and payment of the prevailing employee’s attorney’s fees and costs.
Overtime Compensation Exemption Types
In analyzing whether an employee is exempt, we must first consider the type of work the employee is performing. Under the job duties test, workers must perform certain duties as their “primary” duty. There are three (3) main exemptions under the job duties test of the FLSA – the executive exemption, the administrative exemption, and the professional exemption.
1. The Executive Exemption
To fall under the executive exemption, an employee’s primary duty must consist of managing the enterprise or managing a customarily recognized department or subdivision of the enterprise. Additionally, the employee must customarily and regularly direct the work of at least two (2) or more full-time employees or their equivalent. Finally, the employee must have the authority to hire or fire other employees, or the employee’s suggestions or recommendations as to the hiring, firing, advancement, promotion or any other change of status of other employees must be given particular weight. The executive exemption can be found at 29 C.F.R. §541.100.
2. The Administrative Exemption
To qualify under the administrative exemption, an employee’s primary duty must be the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers. In addition, the employee’s primary duty must include the exercise of discretion and independent judgment with respect to matters of significance. The administrative exemption can be found at 29 C.F.R. §541.200.
3. The Professional Exemption
The final exemption that we commonly hear about is the professional exemption. To qualify for this exemption, the employee’s primary duty must be the performance of work that requires advanced knowledge in a field of science or learning and must be customarily acquired by a prolonged course of specialized intellectual instruction. The professional exemption can be found at 29 C.F.R. §544.300.
In addition to satisfying one (1) of the above exemptions, an employee will only be considered exempt if the employee is paid on a salary basis and if the employee earns a minimum weekly salary. Currently, the minimum weekly salary is Four Hundred Fifty-Five Dollars ($455.00) per week which equals Twenty-Three Thousand Six Hundred Sixty Dollars ($23,660.00) annually.
Modernizing Existing Overtime Regulations
Back in 2016, President Obama issued a Memorandum directing the Secretary of State to modernize existing overtime regulations. The result was an amendment which would have increased the minimum salary requirement to Nine Hundred Thirteen Dollars ($913.00) per week or Forty-Seven Thousand Four Hundred Seventy-Six Dollars ($47,476.00) per year.
The change was scheduled to go into effect on December 1, 2016. However, just days before, Texas District Judge Amos L. Mazzant III issued a nationwide preliminary injunction blocking the rule from taking effect.
Currently, the minimum weekly salary remains at Four Hundred Fifty-Five Dollars ($455.00). However, in the fall of 2018, the Trump Administration formally announced its intention to revisit the issue to determine the appropriate minimum salary level.
While an increase is anticipated, it does not appear that this Administration will go anywhere near the $47,500 salary that was previously proposed.
The information presented in this post is not legal advice and does not form a lawyer/client relationship. Laws and circumstances can differ and change.
Please contact us for a personal review of your situation