Like we discussed in our previous blog; part of the purposes of the Fair Labor Standards Act (FLSA) is to determine minimum wage and overtime payments. These items are dependent upon an employee’s status.
Exempt positions are excluded from minimum wage, overtime regulations, and other rights and protections given to nonexempt workers. For a position to be exempt, employers must pay a salary and adhere to strict rules regarding the processing of and the deductions from the salary, rather than pay an hourly wage for hours worked.
The Department of Labor (DOL) maintains details on whether an employee is exempt; they use salary basis test and the duties test determine if someone is truly exempt. These FLSA exempt classifications are limited to employees who perform relatively high-level work. Whether the duties of a particular job qualify as exempt depends on what those duties are. Job titles or position descriptions alone, do not determine if a position is exempt. Additionally, there are very limited reasons in which we can deduct monies from an exempt employees pay.
Deductions from exempt employee pay are allowed:
- When an employee is absent from work for one or more full days for personal reasons other than sickness or disability;
- For absences of one or more full days due to sickness or disability if the deduction is made in accordance with a bona fide plan, policy or practice of providing compensation for salary lost due to illness; (before the employee has qualified for the plan, policy or practice or after the employee has exhausted the leave allowance under the plan.)
- To offset amounts employees receive as jury or witness fees, or for temporary military duty pay;
- For penalties imposed in good faith for infractions of safety rules of major significance;
- For unpaid disciplinary suspensions of one or more full days imposed in good faith for workplace conduct rule infractions;
- In the employee’s initial or terminal week of employment if the employee does not work the full week, or
- For unpaid leave taken by the employee under the federal Family and Medical Leave Act.
Let’s do the math!
The Department of Labor enforces the standards of the FLSA. They have created a salary basis test and duties test to determine if an employee is qualified to be exempt from overtime wages. If an employee is not exempt, then they are always non-exempt.
Option 1) Meets salary basis test + Meets duties test = Exempt (Salary)
Option 2) Does not meet salary basis test + Meets duties test = Non-Exempt (Hourly)
Option 3) Meets salary basis test + Does not meet duties test = Non-Exempt (Hourly)
Option 4) Does not meet salary basis test + Does not meet duties test = Non-Exempt (Hourly)
***Employees who are paid less than $23,600 per year ($455 per week) are always Non-Exempt (Hourly)
***Employees who earn more than $100,000 per year are generally Exempt (Salary)
Non-Exempt employees are entitled to overtime pay (one and a half times their regular rate) for any hours worked over 40 in any given workweek. You must keep records of the actual time worked to ensure overtime payments are made accordingly.
What about ‘Comp Time’ in lieu of overtime?
It is generally illegal to give non-exempt employees comp time (time off) instead of paying them overtime. The only exception is for employees of state or local government agencies.
Compensatory Time: Under certain prescribed conditions, employees of State or local government agencies may receive compensatory time off, at a rate of not less than one and one-half hours for each overtime hour worked, instead of cash overtime pay. Law enforcement, fire protection, and emergency response personnel and employees engaged in seasonal activities may accrue up to 480 hours of comp time; all other state and local government employees may accrue up to 240 hours. An employee must be permitted to use compensatory time on the date requested unless doing so would “unduly disrupt” the operations of the agency.
Salary Non-Exempt Status
Salary Non-Exempt positions are designed by the organization to pay the employee a salary that equates to at least minimum wage for every hour worked, while still maintaining their non-exempt status. As far as the FLSA is concerned, this is simply a non-exempt status. If a salary non-exempt employee were to work over 40 hours in a week, they would still be owed overtime pay. Employees in this status should still track their hours worked weekly.
Will the Salary Basis Test or Duties Test Ever Change?
The Department of Labor (DOL) made an effort to change the overtime regulations in 2016 to increase the salary basis test for exemption status. One week before the December 1, 2016 effective date of the DOL’s final regulations, the U.S. District Court for the Eastern District of Texas granted an emergency motion forbidding the DOL from enforcing the new overtime rule on a nation-wide basis. Some news is beginning to spread that the DOL will soon be revisiting this topic, but until further action, the salary threshold will remain as it has been since 2004.
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