Are salary employees exempt
The Fair Labor Standards Act (FLSA)
requires that employees be paid overtime for all hours worked over 40 per week.
However, not all employees are eligible for this overtime pay. In order to
qualify for FLSA protections, an employee must fall under the definition of
exempt from overtime rules and regulations. The exemption has two parts: salary
level and job duties. An employee must be paid at least $23,600 per year and
perform certain specific job duties in order to be considered exempt from FLSA
rules regarding overtime pay.
Are salary employees exempt from overtime?
The answer to "Are salary
employees exempt from overtime?" is no, not automatically. Salaried
employees must meet all of the requirements of a specific exemption in order to
be exempt from overtime pay; there are 13 different exemptions for salaried
workers.
To be considered an exempt employee
and therefore not eligible for overtime compensation, an employee must:
- Be paid a salary;
- Be paid at least $913 per week on average;
- Be paid on a salary basis (meaning you receive the same
amount each week).
Is there a salary range for being exempt from overtime?
The salary range for exempt
employees is $23,660 to $47,476. There is no minimum or maximum salary that
must be paid to be considered exempt from overtime pay. Exempt employees must
be paid on a salary basis (see next section).
In order to qualify as an exempt
employee under the Fair Labor Standards Act (FLSA) you must meet certain requirements.
The criteria includes:
- Be paid at least $455 per week (or $23,660/year) in
2019
- Work in an administrative role doing office work
- Perform work which primarily involves exercising
independent judgment and discretion about significant matters; and
- Must not be engaged in manual labor
Do I have to be paid a salary?
The answer is yes, you have to be
paid a salary. The term 'salary' is defined in the FLSA as an amount that is
predetermined and fixed (not subject to reduction because of variations in the quality
or quantity of your work) and paid on a regular basis. You must receive this
amount at least once per pay period; it cannot be reduced because you're
assigned fewer hours than usual, whether voluntarily or involuntarily.
Additionally, your employer cannot lower your salary based on any type of leave
taken by you—vacation time or sick days—or due to any other reason except ones
related to business necessity (e.g., reduction in force).
Salary requirements exist so
employers don't treat employees like hourly workers who are only paid when they
work rather than salaried employees who are given predetermined wages
regardless of how often they appear at their workplace each day. What this
means is that if an employee's salary falls below minimum wage due to them
taking too many days off or being absent from work without cause, then his/her
employer must make up for those losses through additional paychecks until
he/she reaches minimum wage again."
Is it okay if my pay fluctuates each week so long as I receive at least $913 per week on average?
The fluctuation can also be within
the same pay period, but not within the same pay cycle. You cannot receive $913
per week on average one week, and then earn only $746 the next week and still
be exempt from overtime.
It is important to keep in mind that
if you are currently receiving straight time pay under your state's minimum
wage laws, it is possible that you will no longer be able to do so after
switching to hourly status as an exempt employee. Employers have an obligation
under federal law (and some state laws) to maintain records of all hours worked
by non-exempt employees. If your employer does not have this documentation
available for review by regulators or litigants it could result in penalties or
claims against them for unpaid overtime compensation owed to their employees.
Can I receive overtime pay even though I am paid a salary?
There are two main types of
exemption: the executive and administrative exemption, and the professional
exemption. The executive and administrative exemptions are based on salary
thresholds, while the professional exemption is not. The Department of Labor
has provided an excellent tool for determining whether someone is exempt or
non-exempt from overtime pay.
The key difference between these two
categories is that those who are exempt under the executive/administrative
category can only earn $23k in salary per year (or $455/week), but those
working under the professional category may be paid up to $679/week with no
limit on their base salary as long as they meet certain requirements (education
level and job duties).
If you work more than 40 hours per week at your regular rate of pay, then you're eligible for overtime compensation—even if your employer considers you a salaried employee.
Executive exemption
As an employer, you may be wondering
if your employees qualify for the executive employee exemption. To be
considered exempt under this section, an employee must:
- Have a primary duty of managing a department or
subdivision of the business (or in charge of at least 2 full-time
equivalent employees).
- Customarily and regularly direct the work of at least 2
other full-time equivalent employees.
- Have the authority to hire or fire employees or make
recommendations regarding hiring, firing, advancement and promotion that
are given particular weight.
By law, no matter what state you
live in, if an employee meets all three criteria above then they're exempt from
overtime pay requirements (because they're considered "management"
level). If they meet only two of those criteria then their salary must exceed
$455 per week (or $23/hour) by June 2020 to remain exempt from overtime pay
requirements.
Administrative exemption
- Administrative exemption
This exemption is for employees who
do administrative work directly related to the management or general business
operations of the employer or the employer's customers. To qualify for this
exemption, you must perform certain types of duties, including:
- Performing office administrative functions such as
purchasing supplies and equipment; answering telephones; scheduling
appointments; filing documents and records; transcribing dictation;
operating a switchboard; handling mail.
- Compiling data, such as writing reports on company
policies or compiling lists of customers' names, mailing addresses and
phone numbers.
- Processing paperwork such as invoices and purchase
orders.
Professional exemption (for professionals who are learned or creative tasks)
To qualify as a professional
employee, you must:
- Be learned or creative in your work. Examples of such
jobs include accountants, architects, engineers, lawyers and doctors.
- Be paid on a salary basis. Employees who are paid
hourly may not be considered exempt employees even if they have advanced
education or great experience.
- Earn more than $913 per week (equivalent to $47,476 per
year) or meet the salaried earnings test discussed below (see "Salary
Basis Test" section). This means that most professionals are entitled
to overtime pay under federal law—with very limited exceptions!
If your salary meets all three requirements above then you are exempt from the FLSA's overtime requirements — even if you're working more than 40 hours in a workweek!
Not every salaried employee is exempt.
You can't just assume that your
employee is exempt, especially if they're being paid hourly. The employee must
meet all requirements of the FLSA to be exempt.
- Salary exemption is not guaranteed. An employee must meet all requirements of the FLSA in order to be considered exempt from overtime pay under the "white collar" exemptions. Those include:
- Being paid on a salary basis
- Receiving at least $913 per week on average over a
calendar quarter (not necessarily for each week), or $4,500 per calendar
year (which may include bonuses paid throughout)
Conclusion
When determining if you are an
exempt employee, it is important to understand the different types of
exemptions that exist. If your job duties meet one or more of these definitions,
then you may be eligible for a salary-only exemption from overtime pay.