Understanding Overtime Law

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This post will help guide you through the basics of the federal overtime provisions, to help you understand the often confusing definitions and avoid some common problems.

Welcome to the Fair Labor Standards Act

The Fair Labor Standards Act (FLSA) is not new. It was enacted in 1938 during the Great Depression. The FLSA covers two areas that affect all employers: minimum wage and overtime. In this post we will focus on overtime.

The FLSA defines two types of employees, those that are non-exempt (employees that are covered by the FLSA), and exempt (those that are not).

Non-Exempt Employees and Overtime

Non-exempt employees 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.

Who are non-exempt employees?

All employees other than those who qualify as exempt below.

  • “Blue Collar” workers who do manual labor or who perform work involving repetitive operations with their hands, physical skill and energy.
  • Police, fire fighters, paramedics and other first responders, no matter how much money they earn.

Exempt Employees

To qualify for exemption, employees generally must meet certain tests regarding their job duties and be paid on a salary basis at not less than $455 per week.

Job titles do not determine exempt status. This is a very important point. Employers often make the mistake of thinking that they can decide whether or not an employee is exempt from the FLSA overtime provision based on job titles. In order for an exemption to apply, an employee’s specific job duties and salary must meet all the requirements of the Department’s regulations.

Who are Exempt Employees?

  • Executive
  • Administrative
  • Professional
  • Outside sales employees
  • Certain computer employees
  • Highly compensated employees

The following section gives the details of the specific job duties and salary for each exempt group:

Executive Exemption

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

• The employee must be compensated on a salary basis (as defined in the regulations) at a rate not less than $455 per week;

• 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.

Administrative Exemptions

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

• The employee must be compensated on a salary or fee basis (as defined in the regulations) at a rate not less than $455 per week;

• 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.

Professional Exemption

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

• The employee must be compensated on a salary or fee basis (as defined in the regulations) at a rate not less than $455 per week;

• 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 must be compensated on a salary or fee basis (as defined in the regulations) at a rate not less than $455 per week;

• 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.

Computer Employee Exemption

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

• The employee must be compensated either on a salary or fee basis (as defined in the regulations) at a rate not less than $455 per week or, if compensated on an hourly basis, at a rate not less than $27.63 an hour;

• 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:

The application of systems analysis techniques and procedures, including consulting with users, to determine hardware, software or system functional specifications;

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;

The design, documentation, testing, creation or modification of computer programs related to machine operating systems; or

A combination of the aforementioned duties, the performance of which requires the same level of skills.

Outside Sales Exemption

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.

Highly Compensated Employees

Highly compensated employees performing office or non-manual work and paid total annual compensation of $100,000 or more (which must include at least $455 per week paid on a salary or fee basis) are exempt from the FLSA if they customarily and regularly perform at least one of the duties of an exempt executive, administrative or professional employee identified in the standard tests for exemption.

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  1. […] The Fair Labor Standards Act (FLSA) is the most important law to consider. The FLSA divides employees into two categories, “exempt” (generally salaried professional or administrative employees) and “non-exempt” (generally employees paid by the hour). For more detailed information about the FLSA, click here. […]

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