Overtime Pay – Exempt versus Non-Exempt

Overtime Pay – Exempt versus Non-Exempt

The Fair Labor Standards Act (FLSA) is a federal law which establishes minimum wage, overtime pay, recordkeeping, and youth employment standards affecting employees in the private sector and in Federal, State, and local governments. Most, but not all employees are covered by the FLSA.

Under the FLSA, unless exempt, employees covered by the Act must receive overtime pay for hours worked over 40 in a workweek at a rate not less than time and one-half their regular rates of pay.  Section 13(a)(1) of the FLSA provides an exemption from both minimum wage and overtime pay for employees employed as bona fide executive, administrative, professional (learned, creative or computer) and outside sales employees. To qualify for exemption, employees generally must meet one of the following tests regarding their job duties and be paid on a salary basis at not less than $684 per week.

To qualify for the executive employee exemption, all of the following tests must be met:

  • The employee’s primary duty must be managing the enterprise, or managing a customarily recognized department or subdivision of the enterprise;
  • The employee must customarily and regularly direct the work of at least two or more other full-time employees or their equivalent; and
  • The employee must have the authority to hire or fire other employees, or the employee’s suggestions and recommendations as to the hiring, firing, advancement, promotion or any other change of status of other employees must be given particular weight.

To qualify for the administrative employee exemption, all of the following tests must be met:

  • The 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; and
  • The employee’s primary duty includes the exercise of discretion and independent judgment with respect to matters of significance.

To qualify for the learned professional employee exemption, all of the following tests must be met:

  • The employee’s primary duty must be the performance of work requiring advanced knowledge, defined as work which is predominantly intellectual in character and which includes work requiring the consistent exercise of discretion and judgment;
  • The advanced knowledge must be in a field of science or learning; and
  • The advanced knowledge must be customarily acquired by a prolonged course of specialized intellectual instruction.

To qualify for the creative professional employee exemption, all of the following tests must be met:

  • The employee’s primary duty must be the performance of work requiring invention, imagination, originality or talent in a recognized field of artistic or creative endeavor.

To qualify for the computer employee exemption, the following tests must be met:

  • The employee must be employed as a computer systems analyst, computer programmer, software engineer or other similarly skilled worker in the computer field performing the duties described below;
  • The employee’s primary duty must consist of:
  1. The application of systems analysis techniques and procedures, including consulting with users, to determine hardware, software or system functional specifications;
  2. The design, development, documentation, analysis, creation, testing or modification of computer systems or programs, including prototypes, based on and related to user or system design specifications;
  3. The design, documentation, testing, creation or modification of computer programs related to machine operating systems; or
  4. A combination of the aforementioned duties, the performance of which requires the same level of skills.

To qualify for the outside sales employee exemption, all of the following tests must be met:

  • The employee’s primary duty must be making sales (as defined in the FLSA), or obtaining orders or contracts for services or for the use of facilities for which a consideration will be paid by the client or customer; and
  • The employee must be customarily and regularly engaged away from the employer’s place or places of business.

If a business categorizes positions as exempt when they do not meet one of these tests, the company is in violation of the FLSA. Penalties for misclassifying an employee include back pay for overtime pay for the previous two years, or three years in the case of a willful overtime violation, plus a penalty equal to the amount owed and attorneys’ fees. The Department of Labor can also impose penalties of up to $1,100 for each violation.

If you are being denied overtime, or are a business being sued for failure to pay overtime, contact the Law Office of Andrew Szocka, P.C. to discuss how we can represent you and resolve the FLSA issue to your satisfaction.