Salary pay does not mean exempt from overtime pay

Just because you are paid salary it does not necessarily mean that you are not entitled to overtime payment for hours that you work in excess of forty (40) in a workweek. Many people have the impression that if they are paid a salary they are not entitled to overtime; this is not always the case. In determining if an employee falls under one of the “white collar exemptions” (Administrative, Executive, Professional) of the Fair Labor Standards Act (“FLSA”) three tests must be put into play, the salary test, the salary basis test and the duties test. Only if each test is met, the employee will be considered exempt and will not be entitled to overtime payments.

The salary and salary basis tests are defined in the regulations issued by the Department of Labor at 29 CFR §541.600. Under the first test – the salary test - an employee must be compensated on a salary basis at a rate of not less than $455 per week. The $455 a week may be translated into equivalent amounts for periods longer than one week.

The second test – the salary basis test - the employee must be paid a guaranteed minimum of $455 per week which is not subject to reduction because of variations in the quality or quantity of the work performed. With few exceptions, if the employee works any time in a workweek, he or she is entitled to the predetermined salary.

The third test – the duties test – looks to the actual duties performed by the employee, not what their job description or title says.

The Executive Exemption applies to an employee: (1) whose primary duty is management of the enterprise in which the employee is employed or of a customarily recognized department or subdivision thereof; (2) who customarily and regularly directs the work of two or more other employees; and (3) who has the authority to hire or fire other employees or whose suggestions and recommendations as to the hiring, firing, advancement, promotion or any other change of status of other employees are given particular weight. See 29 C.F.R. §§541.100-106

The Administrative Exemption applies to an employee: (1) whose primary duty is 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; and (2) whose primary duty includes the exercise of discretion and independent judgment with respect to matters of significance. See 29 C.F.R §§541.200-204

The Professional Exemption applies to an employee who meets the salary basis test and is either a learned professional or a creative professional. To qualify for the learned professional exemption, the position held by the employee must require knowledge of an advanced type in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction. To qualify for the creative professional exemption, the position held by the employee must require invention, imagination, originality or talent in a recognized field of artistic or creative endeavor. See 29 CFR §§541.300-304

It is important to remember that the determination of whether an employee meets one of the three “white collar exemptions” is very fact specific. If you have any question about whether you (or your employees) are properly classified, you should contact an attorney as soon as possible.