Overtime Pay For Exempt Employees

The struggle of living on low wages cannot be understated. Supporting a family, pursuing your dreams – sometimes it’s nearly impossible to keep up when every paycheck goes straight to rent, utilities and food, rather than a savings account.

But thanks to the Fair Labor Standards Act, most low-wage employees have been promised one thing: that their hard work will not go uncompensated. The FLSA guarantees the vast majority of workers a minimum wage of $7.25 and fair overtime pay when they go above and beyond.

Am I Really Exempt From The FLSA’s Wage & Overtime Regulations?

But the vast majority isn’t all, and a small portion of workers fall into “exemptions” that mean they’re not entitled to the minimum wage or overtime under federal law.

Other workers have been fed a lie. In fact, the Department of Labor (DOL) calls employee misclassification one of “the most serious problems facing” workers and the American economy. At WageAdvocates.com, we consider wage theft, whether it’s through misclassification or any common wage violation, the worst insult.

If you’ve been misclassified as exempt, your employer isn’t just profiting off your labor. They’re stealing money right out of your pocket, too.

In this article, we’ll cover the most common real exemptions used by employers. In the end, you’ll be closer to knowing whether or not you’re entitled to overtime wages and the federal minimum wage.

Real Exemption #1: Executives, Administrators, Professionals & Outside Salespeople

One of the biggest FLSA exemptions is based on what kind of work you do. But there are other criteria that need to be met first, before your primary job tasks can be taken into account at all.

Employees who are paid a salary of no less than $455 every week, or $23,600 a year, may be exempt under section 13(a)(1) of the FLSA. If you make less than that, or you make a little more but aren’t paid a salary, it’s very likely that you’re entitled to overtime.

Here’s where your job duties (not your title) come into play. Only workers who can truly be considered either “executives,” “administrators,” “professionals” or “outside sales employees” will be exempt under 13(a)(1).

Workers who get paid a salary of more than $455 per week, but don’t fall into one of those three categories, are not exempt. They’re entitled to overtime.

Am I An “Executive”?

Under the FLSA, “executives” manage other employees.

Management usually needs to be the primary duty of your employment and in most cases, you’ll need to manage two or more other workers.

Here are some characteristic tasks that “executives” perform according to the FLSA:

• delegating work to other employees
• setting hours to be worked and adjusting pay for other workers
• interviewing prospective employees and training the ones hired
• deciding how the work should be done
• making budgets for a project

An executive can manage an entire company, or just a department within a company. An executive can also be tasked with managing a single shift.

The final criteria of management is that you need to have some genuine input in personnel decisions. This doesn’t necessarily mean that you hire and fire people personally, although it can. Workers who make recommendations on hiring and firing to their boss can be considered executives, as long as those recommendations have “real weight.”

Remember, it doesn’t matter whether or not you have “manager” in your job title; all that matters is what you actually do. An “assistant store manager” may or may not be exempt under the FLSA, depending on how much actual managing they do.

Executive Exemption Test

1. Do you make a salary?
2. Are you guaranteed at least $455 every week no matter how much you actually work?
3. Do your job duties sound like the ones we described for a manager?

If you said yes to all three of those questions, you may not be entitled to overtime pay. If you said no to any of those questions, but your employer has told you that you’re an exempt executive, you may be the victim of wage theft.

Am I An “Administrator”?

Administrators do office work that isn’t manual in nature, and that work has to be directly linked to a business’ “general operations.”

Here are some typical duties that administrators handle:

• taxes
• accounting
• budgeting
• human resources
• database administration

But just doing work like that isn’t enough. To be an administrator under the FLSA, you need to be able to exercise your own discretion, what’s called “independent judgment,” in performing duties that actually impact the functioning of the business.

A handy rule of thumb for this criteria is if you ever have the opportunity to consider two or more courses of action, evaluate them and then act on a decision:

• Are you able to design and implement new management policies yourself?
• Can you change a preexisting operating practice to make it better?
• Do you have the authority to give the go-ahead on issues that will have a major financial impact on the business?
• Can you plan out goals for the business, either in the short or long-term?
• Are you tasked with investigating potential problems, and have the authority to resolve them?

If you said “no” to those questions, you’re probably not an “administrator.”

Administrator Exemption Test

1. Are you paid a salary?
2. Are you guaranteed at least $455 per week, no matter how many hours you end up working?
3. Do you sound like an “administrator” as we’ve defined it?

If you said no to any one of those questions, you’re most likely not an “administrator.”

Note that most administrative assistants are not considered “administrators” under the FLSA.

Am I A “Professional”?

There are two types of “professionals” according to the FLSA: “learned professionals” and “artistic professionals.”

Learned Professionals

Being a “learned professional” is all about advanced knowledge.

Usually, the FLSA will use an advanced degree, one beyond undergraduate, as a yardstick for whether or not a worker has advanced knowledge in their field of employment. Apprenticeships don’t count.

If you’re a “learned professional,” you perform work of a classically “intellectual” nature. Falling back on your specialized understanding of a subject, you analyze problems and deduce solutions. In most cases, your work will always rely on independent judgment, without anyone else’s immediate oversight.

Only certain fields of knowledge are considered for the “learned professional” exemption:

• Accounting
• Actuarial Computation
• Architecture
• Biology
• Chemistry
• Engineering
• Law
• Medicine
• Pharmacy
• Physical Sciences
• Teaching
• Theology

Having an advanced degree in any subject isn’t enough. In most cases, you need to have a degree in the field in which you actually work to be considered a “learned professional.”

Artistic Professionals

Most “artistic professionals” are rely on creativity, imagination and invention to perform work in one of four fields of the arts: music, writing, acting and graphic arts.

Most:

• actors
• writers
• musicians
• cartoonists
• composers

are not entitled to overtime wages under the FLSA.

Professional Exemption Test

1. Do you get paid a salary?
2. Is your salary at least $455 every week?
3. Do you sound like a “learned” or “artistic professional” as we’ve described them?

If you said “yes” to all three of those questions, you may be properly classified as an exempt “professional.” If you said “no” to any of them, you’re probably not a “professional” as defined by the FLSA and thus entitled to overtime wages.

Am I An “Outside Sales Employee”?

“Outside sales employees” work away from their employer’s place of business often and on a regular basis (at least once every workweek, in most cases).

Obviously, their main duty is sales, either selling products or winning orders and contracts for their employer’s services or for the use of an employer’s facilities.

According to the DOL, any “transfer of title to tangible property, and in certain cases, of tangible and valuable evidences of intangible property” is considered a sale. This includes selling advertising time on the radio or TV.

If you deliver products to your company’s clients, and also happen to make sales, you’re only considered exempt from overtime if those sales are considered the primary duty of your employment.

Under the FLSA, outside sales employees do not need to make a salary of at least $455 every week to be considered exempt.

Outside Sales Exemption Test

1. Is your primary duty making sales, or obtaining orders or contracts from a customer?
2. Do you customarily work away from your employer’s business?

If you answered “yes” to both of those questions, you may be accurately categorized as an outside sales employee. If not, you may be misclassified and losing out on money that you’ve earned.

Real Exemption #2: Specific Jobs

Lots of specific job duties can make some employees exempt from the FLSA’s overtime and minimum wage requirements:

Some Workers Aren’t Entitled To Overtime, But Are Entitled To The Minimum Wage

• Airline employees
• Aircraft, boat and tractor-trailer salespeople
• Mechanics and salespeople at car dealerships
• Drivers, mechanics and loaders employed by motor carriers whose duties affect the safety of vehicles on interstate highways
• Employees of national parks, national forests or wildlife refuges who work in amusement or recreation
• Purchasers of agricultural products
• Workers who transport fruits and vegetables
• Workers who process sugar
• People who sell farm implements
• Workers at livestock auctions
• Elevator operators in rural areas
• Police offers who work in small public police departments, less than 5 officers
• Firefighters who work in small public fire departments, ones with less than 5 firefighters
• Forestry workers employed by small companies, less than 9 employees
• Employees of small lumber operations, less than 9 employees
• Local delivery people
• Cab drivers
• Houseparents at not-for-profit education institutions
• Workers at movie theaters
• Employees at small-market radio stations
• Employees at small-market TV stations
• Railroad workers
• People who work at sea on American vessels

Other Workers Are Exempt From Both The Minimum Wage & Overtime Pay

• Babysitters who don’t work for the same client on a regular basis
• Federal criminal investigators
• Fisherpeople
• Homeworkers making wreaths
• Newspaper delivery workers
• Employees of newspapers with limited circulation
• Switchboard operators
• People who work at sea on non-American vessels

Disabled workers are exempt from the federal minimum wage, but are still entitled to overtime pay. So are workers at “amusement or recreational establishments” that aren’t open more than 7 months out of the year, or places that make significantly more money in one part of the year.

Real Exemption #3: Commissioned Salespeople

Salespeople working for “retail or service establishments” may not be entitled to overtime wages, if more than half of their earnings come from commission.

If the goods or services your employer sells are for resale, the business does not count as a “retail or service establishment” under the FLSA. Only businesses that make at least 75% of their annual sales on goods or services that are not for resale count.

But to really know whether or not you’re a commissioned salesperson, you’ll have to calculate your hourly regular rate. If you make on average more than one-and-a-half the minimum wage (either the federal minimum wage or a state minimum wage, if applicable) for every hour worked, you may be an exempt commissioned salesperson. Your regular rate includes commissions, plus a salary if you get one.

It does not matter whether your commission gets calculated on a weekly, biweekly, monthly or other basis.

Commissioned Salesperson Exemption Test

1. Do you work for a retail or sales establishment?
2. Are more than half of your earnings from commissions?
3. Do you make more than one-and-a-half the federal minimum wage of $7.25 per hour or an applicable state minimum wage?

If you answered “no” to any one of those questions, you may be misclassified as a commissioned salesperson and losing out on overtime pay.

Real Exemption #4: Some Computer Employees

Certain skilled workers in the field of computer science may not be entitled to the FLSA’s minimum wage or overtime pay provisions. Generally defined, most software engineers, programmers and systems analysts will fall under this exemption, but it’s more important what your job actually entails.

First, you have to make a salary of at least $455 per week or an hourly wage no less than $27.63.

Next, your primary duties have to involve some or all of the following:

• applying the techniques and procedures of systems analysis to decide necessary hardware, software or system functional specifications
• designing, developing, analyzing, testing or modifying computer systems or programs, based on user or system design specs

As in the “learned professional” exemption, there’s a presumption of advanced knowledge or skill in this one.

Most people who physically manufacture or repair computer hardware are not included in this exemption. Nor are workers who depend heavily on computers, like engineers and drafters, but aren’t actually systems analysts or programmers.

Are You Being Misclassified As An Independent Contractor?

Probably. At least that’s what the latest Department of Labor guidance suggests.

The DOL has been hostile to the idea of independent contractors for a long time; in their eyes, employers misclassify their employees as independent contractors more often than not, shirking taxes and withholding basic protections, including the minimum wage and overtime pay, from workers who deserve them.

Administrator’s Interpretation No. 2015-1 just made it a lot harder for businesses to get out of paying their workers fairly. Released on July 15, 2015, the standard-setting document expands the definition of “employee,” while narrowing the definition of “independent contractor.”

To find out whether or not you’re actually an “independent contractor” under the Department of Labor’s new doctrine, click here.

Change Comes For Many Home Health Care Aides, Too

For decades, thousands of home health care aides fell under the FLSA’s “companionship” exemption, and were not entitled to the federal minimum wage or overtime pay.

But after more than a year of legal challenges, the Department of Labor’s fight to cover these vital workers has succeeded. On Friday, August 21, 2015, a US Circuit Court of Appeals in Washington, D.C. upheld new regulations, dramatically narrowing the definition of “companionship” and ensuring that third-party employers could no longer classify their in-home workers as exempt.

Here are the highlights:

• only workers who are actually employed by the individual or family using the in-home services will be exempt from the FLSA’s minimum wage and overtime requirements
• third-party companies, including home care agencies, can no longer claim the companionship exemption
• live-in domestic service workers employed by a third-party agency are now entitled to both the minimum wage and overtime pay

According to a DOL press release, the new rules will extend minimum wage and overtime protections to almost two million home-care workers, including many home health care aides who were previously exempt.