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Wage & Hour Laws

How to Tell If an Employee Should Be Exempt


Mar 15, 2016

exempt employeesIn 2014, the Whitehouse announced plans to make sweeping changes to the current overtime protections. As of now, no formal decision has been made, but news outlets are claiming the rules will go into effect later this year. And while there are still possible changes, the current proposed rules include:

  1. Changing the standard salary level to $921 per week, or $47,892 annually
  2. Increasing the total annual compensation requirement needed to exempt highly compensated employees (HCEs) to $122,148 annually
  3. Establishing a mechanism for automatically updating the salary and compensation levels going forward

So what are the current rules for correctly classifying employees as either exempt or non-exempt?

What are the FLSA Rules for Exempt and Non-Exempt Employees?

There’s actually a long list of rules and exceptions you can find on the DOL’s website, but here are the main ones:

Non-Exempt vs. Exempt

Non-exempt employees are covered by the FLSA and must receive overtime pay—at least one and a half times their regular pay rate—for any time they work over 40 hours within a workweek (seven consecutive 24-hour periods).

On the other hand, exempt employees are not entitled to overtime pay. To qualify for exempt status an employee must:

  • Be paid at least $23,600 per year ($455 per week)
  • Be paid on a salary basis
  • Perform exempt job duties 

Exempt Job Classifications and Duties

There are several job classifications that can qualify for exempt status. Here are three of the most frequently cited:

Executive Exemption

  • Primary duty must be managing the enterprise, or managing a customarily recognized department or subdivision of the enterprise
  • Customarily and regularly directs the work of at least two or more full-time employees or their equivalent
  • Must have the authority to hire or fire other employees, or a status where their opinion on someone else’s job status is given particular weight

Administrative Exemption

  • 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
  • Primary duty includes the exercise of discretion and independent judgment with respect to matters of significance.

Professional Exemption

  • Learned: primary duty must be the performance of work requiring advanced knowledge in a field of science or learning and must be acquired by a prolonged course of specialized instruction
  • Creative: primary duty must be the performance of work requiring invention, imagination, originality or talent in a recognized field of artistic or creative endeavor

These classifications and job duties are important for employers to pay attention to because violating the Fair Labor Standards Act’s (FLSA) wage and hour rules is a very costly mistake—one that’s on the rise.

According to corporate law firm Seyfarth Shaw LLP, “In federal court, employers are more likely to face wage and hour claims than any other form of employment litigation.” The firm also compiled the data on cases filed in federal court and found, “the annual wage and hour caseload spiked 7.6%—to 8,781—in FY15.”

Steps You Can Take to Maintain Compliance

In our next blog, we are going to discuss what steps you can take to maintain compliance. In the meantime, if you’d like to learn more about our wage and hour law training that covers how to properly classify employees, schedule a demo today.

 

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