Increasingly, employers find themselves accused of violating the provisions of the Fair Labor Standards Act (“FLSA”) regarding the payment of overtime wages. The FLSA provides that employers must pay overtime (time and one half the regular hourly rate of pay) for all hours worked in excess of 40 hours per work week. This rule does not apply to employees who are “exempt” from the requirements of the FLSA. The main reason that plaintiffs’ attorneys find these types of cases attractive is that the FLSA provides for attorney’s fees in these types of cases.
Employers have to decide if their employees are “non-exempt” (from the requirements of the FLSA) or “exempt.” There are four types of “exempt” employees. They are executive, administrative, professional and outside sales employees. For the purposes of this article, we are only focusing on the executive, administrative and professional exemptions. In addition, for the purposes of this article, we will focus on the some basic tests to determine whether or not an employee should be classified as an “exempt” employee or a “non-exempt” employee under the FLSA.
To determine whether or not an employee is an “executive” exempt employee, the test is as follows:
- The employee is paid no less than $455 per week;
- The employee’s primary duty involves management related job duties;
- The employee regularly supervises and directs the work of two or more employees;
To determine whether or not an employee is an “administrative” exempt employee, the test is as follows:
- The employee is paid no less than $455 per week;
- The employee’s primary duty is the performance of office, or non-manual work directly related to the management or general business operations of the organization or its customers;
- The work requires the exercise of discretion and independent judgment;
To determine whether or not an employee is a “professional” exempt employee, the test is as follows:
- The employee is paid no less than $455 per week;
- The employee’s primary duty involves work requiring knowledge of an advanced type in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction and study , as distinguished from a general academic education or apprenticeship, and from training in the performance of routine mental, manual or physical processes; or
- The employee performs work requiring invention, imagination, or talent in a recognized field of artistic endeavor; and
- The work requires consistent exercise of discretion and judgment.
- While the exemption for “professional” employees is relatively clear, the “administrative” and “executive” exemptions are not. They are both extremely subjective and they are the most commonly used and misused types of exemptions. For example, determining what constitutes an employee’s “primary” job duties is a very fact specific determination that is open to interpretation.
Mistakes in determining which employees are exempt and which employees are non-exempt can be very costly. In addition to attorney’s fees which were discussed above, employees can recover liquidated damages (double damages) for intentional violations of the FLSA and interest in some circumstances.
To be safe, employers should have their exempt position reviewed on a regular basis to make sure that their employees are properly classified as exempt from FLSA requirements. Employers often make the mistake of relying on job descriptions to justify exemptions. A well written job description may make it sound like the employee is clearly exempt when in reality, his or her duties don’t match the job description and don’t meet the test for an exemption. It is critical for employers to remember that if the Department of Labor conducts an audit of exempt employees, it will be the actual duties of the employee that they are concerned about, not the job description. Employers who are unsure if current employees are exempt should act quickly in order to avoid the consequences discussed above.
