The Fair Labor Standards Act (FLSA) is a US federal law covering the right to minimum wage and overtime pay for employees working over 40 hours a week. Additionally, it prevents employers from hiring minors in “oppressive child labor.” Drafted in 1938, the FLSA is one of the most critical labor regulations in the United States. It has gone through several amendments over the years. Still, its purpose remains the same – to ensure fair compensation for every employed person in the country, regardless of whether they are full-time or part-time employees.
The specifics of the FLSA state that most job positions have the right to the federal minimum wage, as well as overtime pay. This overtime pay should be at least 1.5 times higher than the regular rate for all hours worked more than 40 hours in a week.
However, not everyone is eligible for overtime pay – the FLSA makes a distinction between exempt and nonexempt employees. Generally speaking, a company’s Human Resource (HR) department is responsible for determining overtime eligibility. Both the employee and the employer should carefully review the laws and regulations so that there is no misunderstanding or unfair compensation down the line. Ultimately, the burden of adhering to the FLSA and properly defining whether an employee is exempt or nonexempt falls on the employer.
How are exemptions determined?
The FLSA utilizes special exemption tests to determine whether someone is eligible for overtime provisions (nonexempt) or not eligible for them (exempt). It is vital to understand that these tests are duties tests – they apply to the job duties an individual performs at work, not the name of their job title.
Primary duties are the principal, main, major, or most important duties that an employee performs in a workweek. If an employee is performing both exempt and nonexempt duties, they are usually considered nonexempt.
Employees exempt from overtime pay are categorized as “white-collar workers,” or those who don’t perform manual labor. There are five exempt categories under the FLSA:
- Executive exemption
- Administrative exemption
- Professional exemption
- Computer employee exemption
- Outside sales exemption
Executive Exemptions
All four tests of the executive exemption have to be met for an employee to qualify for it:
- Employee compensation on a salary basis (as per the FLSA) cannot be less than $684 per week (as of January 1st, 2020).
- Primary duties involve managing the enterprise or a department or subdivision of an enterprise.
- The employee must oversee and direct the work of at least two full-time employees or their equivalents.
- The employee must have the authority to hire or fire other employees. Alternatively, the employee’s opinions, suggestions, and recommendations regarding hiring, letting go, or promoting other employees are taken into account and carry a particular weight.
Administrative Exemptions
To be administratively exempt from overtime compensation, an employee must meet all of the following tests:
- Employee compensation on a salary or fee basis (as per the FLSA) cannot be less than $684 per week (as of January 1st, 2020).
- Primary duties include office and non-manual work in management or general business operations of the employer or any of the employer’s customers.
- These primary duties are performed at the employee’s discretion and independent judgment, even in matters of significance.
Professional Exemptions
An employee is considered exempt in the category of learned professional exemptions if they meet all of these tests:
- Employee compensation on a salary or fee basis (as per the FLSA) cannot be less than $684 per week (as of January 1st, 2020).
- Primary duties include performing work requiring advanced knowledge – predominantly intellectual work and that for which the employee must exercise discretion and judgment.
- The advanced knowledge has to be in regards to science or learning.
- The advanced knowledge must be acquired through specialized education over a prolonged period of time.
Aside from learned professional exemption, there is also a creative professionals exemption, for which two tests must be satisfied:
- Employee compensation on a salary or fee basis (as per the FLSA) cannot be less than $684 per week (as of January 1st, 2020).
- Primary duties involve work that requires invention, imagination, originality, or talent in any field that is recognized as artistic or creative.
Computer Employee Exemptions
Computer professionals are exempt from FLSA if all of the following tests apply to them:
- Employee compensation on a salary or fee basis (as per the FLSA) isn’t less than $684 per week (as of January 1st, 2020), or, if the computer employee is compensated on an hourly basis, that hourly rate isn’t less than $27.63 per hour.
- The employee operates as a computer systems analyst, software engineer, computer programmer, or a similar position in the computer industry and performs the duties detailed below.
- The employee’s primary duties are:
- Applying systems analysis procedures – consulting with users to develop hardware, software, or system functional specifications.
- Designing, developing, documenting, analyzing, creating, testing, or modifying computer systems or programs, including prototypes. This can be based on or directly related to the user or system design specifications.
- Designing, documenting, testing, creating, or modifying software related to machine operating systems.
- Any combination of these duties that require the same level of skills.
Outside Sales Exemptions
An outside sales employee can qualify for exemption if they ‘pass’ these two tests:
- Their primary duty has to be making sales (as the FLSA defines it). Alternatively, they have to be obtaining orders or contracts for the services or the use of facilities that a client or customer pays for.
- As the name suggests, the outside salesperson has to customarily and regularly perform their duties away from the employer’s place of business.
There is no salary threshold to be met for an outside salesperson.
Bonus: Highly Compensated Employees
Employees that earn at least $107,432 per year qualify as exempt in these circumstances:
- If they have total annual compensation of $107,432 or more, including the salary threshold of $684 per week on a salary or fee basis.
- Office or non-manual work are the primary duties.
- Additionally, the employee must perform at least one of the exempt duties described above or have the responsibilities of an exempt executive, administrative, or professional employee.
Nonexempt Employees
Overtime exemptions apply only to “white-collar” workers who meet all of the salary and duties tests described in the corresponding categories.
FLSA exemption does not apply to “blue-collar” workers, such as craftsmen, carpenters, ironworkers, mechanics, plumbers, electricians, construction workers, operating engineers, longshoremen, and really anyone engaged in repetitive work that requires the use of their hands, physical strength, or energy.
In the same vein, nonexempt employees are members of law enforcement, fire departments, emergency medical personnel, rescue workers, park rangers, those who work with hazardous materials, and similar, regardless of their rank or pay level. If an employee is engaged in fighting fires, rescuing fire, crime, or accident victims, preventing, detecting, or investigating crimes, performing surveillance duties, apprehending suspects, interrogating, or any other similar work, they are considered nonexempt.
Obligations of the Employer
The minimum wage and overtime rule determined by the FLSA cannot be circumvented, reduced, or otherwise waived. Employers are bound by employment laws to comply with these standards and fairly compensate their employees based on their weekly or annual salaries and the duties they perform.
The employer can, either by choice or through collective bargaining agreements, provide higher wages, a shorter workweek, or higher overtime compensation than what is determined by the FLSA. However, no bargaining agreements can relieve the employer or the employers of their FLSA obligations.
Conclusion
While quite a few labor laws can be confusing and difficult to interpret, the FLSA exemptions are a relatively straightforward business. An employee can either be exempt or nonexempt, and there is no in-between. If you fall under any of the five categories we listed – executive, administrative, professional, computer employee, or outside sales exemption – then it would be best to study these tests and conditions in more detail to determine whether you’re entitled to overtime pay.
It doesn’t matter whether you are a part-time or a full-time employee or if you are working in the private sector or for a federal, state, or local government. Your nationality and immigration status also play no role in whether you are paid the proper amount of wages.
Cilenti & Cooper, PLLC offers experienced, knowledgeable guidance and legal representation to employees in the New York Metropolitan area who are not adequately compensated by their employers. If you would like a free consultation or help to determine whether you should be paid for your overtime work, don’t hesitate to reach out to us through our website or by giving us a call at (718) 841 – 7474.