The Law of Wrongful Discharge

Salaried Workers Are Not Automatically Exempt From Overtime Rules

Posted by Robert Howard | Jul 28, 2017 | 0 Comments

Salary and overtime? If you ask most people if they are entitled to overtime pay when they are paid on a salary basis, they would answer no. Isn't that why they're paid salary? But this common misunderstanding is not the law. The law is that workers are entitled to overtime when they work over 40 hours a week, even if paid on a salary basis, unless their job falls into one of a few exceptions.

Examining overtime exemptions is a 2 step process. In order to avoid paying overtime to a salaried worker, the first requirement is that the employee is paid at least $455 per week — or $23,660 annually — on a salary basis to be exempt from minimum wage and overtime requirements under the Fair Labor Standards Act. Most salaried workers are paid over $23,660 annually so this is the easy part of the analysis.

But paying a worker $23,660 does not exempt the employer from the law on overtime. The second part of the overtime exemption test is a "duties test". This requires an analysis of what the actual job duties are for a particular job. The title of the job does not determine if an employee is exempt from overtime. It doesn't matter that an employee is labeled an 'assistant manager' if their job is still just ringing up sales on a cash register. What matters is what they do each day at their job.

There are exemptions for executive, administrative, professional, outside sales and computer employees.

EXECUTIVE (examples: chief executive officer, controller, vice president, director)

  • Regularly receives a predetermined amount constituting all or part of the employee's salary, which is not subject to reduction because of variations in the quality or quantity of work performed.
  • Primary duty consists of managing the enterprise or a customarily recognized department or subdivision of the enterprise.
  • Customarily and regularly directs the work of two or more full-time employees or their equivalents (for example, one full-time employee and two half-time employees).
  • Has the authority to hire or fire other employees OR makes recommendations that carry particular weight as to the hiring, firing, advancement, promotion or any other change in status of other employees.

ADMINISTRATIVE (examples: manager, supervisor, administrator)

  • Regularly receives a predetermined amount constituting all or part of the employee's salary, which is not subject to reduction because of variations in the quality or quantity of work performed.
  • Primary duty consists of performing office or nonmanual work directly related to the management or general business operations of the employer or the employer's customers.
  • Work includes the exercise of discretion and independent judgment with respect to matters of significance. (Matters of significance would involve something like choosing a vendor, which personnel are assigned to a project, not where lunch is ordered for a team meeting.)

PROFESSIONAL: LEARNED AND CREATIVE (examples: accountant, nurse, engineer, composer, singer, graphic designer)
Learned Professional

  • Primary duty consists of the performance of work that requires advanced knowledge (beyond high school) and that is predominantly intellectual in character and consistently includes the exercise of discretion and independent judgment.
  • The advanced knowledge is in a field of science or learning.
  • The advanced knowledge was acquired by a prolonged course of specialized intellectual instruction (position possesses the appropriate academic degree or has substantially the same knowledge level and performs substantially the same work as degreed employees but possesses advanced knowledge only through a combination of work experience and intellectual instruction)
  • Note: For teachers, licensed or certified practitioners of law and medicine, medical interns and residents covered under this exemption, the salary basis and salary requirements do NOT apply.

Creative Professional

  • Primary duty consists of the performance of work requiring invention, imagination, originality or talent in a recognized field of artistic or creative endeavor as opposed to routine mental, manual, mechanical or physical work.

COMPUTER-RELATED (examples: network or database analyst, developer, programmer, software engineer)

  • Is paid at least $455 weekly OR $27.63 per hour. That is, this exemption does NOT have to meet the salary basis requirement to regularly receive a predetermined amount constituting all or part of the employee's salary, which is not subject to reduction because of variations in the quality or quantity of work performed IF paid at least $27.63 on an hourly basis.
  • Primary duty consists of:
    • The application of system-analyst techniques and procedures, including consulting with users to determine hardware, software or systems functional specifications, OR
    • The design, development, documentation, analysis, creation, testing or modification of computer systems or programs, OR
    • The design, documentation, testing, creation or modification of computer programs related to machine-operating systems, OR
    • A combination of these duties which requires the same level of skills.

OUTSIDE SALES (examples: salespersons, contract negotiators)

  • The salary basis and salary requirements do NOT apply for this exemption. That is, this exemption does NOT have the salary basis requirement to regularly receive a predetermined amount constituting all or part of the employee's salary, which is not subject to reduction because of variations in the quality or quantity of work performed, AND this exemption does NOT have to be paid a minimum salary.
  • Primary duty consists of making sales or obtaining orders for contracts for services or for the use of facilities for which consideration will be paid by the client or customer.
  • Customarily and regularly is engaged away from the employers place or places of business.

HIGHLY COMPENSATED EMPLOYEES PERFORMING EXECUTIVE, PROFESSIONAL OR ADMINISTRATIVE DUTIES

  • Is paid an annual total compensation of $100,000 or more, which includes at least $455 per week paid on a salary basis. The required total annual compensation of $100,000 or more may consist of commissions, nondiscretionary bonuses and other nondiscretionary compensation earned during a 52-week period, but does not include credit for board or lodging, payments for medical or life insurance, or contributions to retirement plans or other fringe benefits.
  • Primary duty consists of performing office, nonmanual work. Note: No matter how highly paid, manual workers or other blue-collar workers, including nonmanagement construction workers, who perform work involving repetitive operations with their hands, physical skill and energy are not eligible for this exemption.
  • Customarily and regularly performs at least one of the exempt duties or responsibilities of the Executive, Professional or Administrative Exemption.

Many employers fail to follow federal regulations in regards to overtime, either because they are uninformed or attempting to limit personnel costs. Workers should check to see if they are currently being paid properly. If you are paid on a salary basis and feel you should be paid overtime for hours worked over 40 hours per week, we suggest that you evaluate your job duties with the possible exemptions.

If after reading the D.O.L. exemptions, you feel you should receive overtime or are not sure if you qualify for overtime pay, please contact Bos & Glazier at (616) 458-6814 or through our website. We have helped many employees receive the pay to which they are entitled.

Sources:  https://www.dol.gov/whd/overtime/fs17a_overview.htm, https://www.dol.gov/whd/overtime/fs17b_executive.pdf, https://www.dol.gov/whd/overtime/fs17c_administrative.pdf, https://www.dol.gov/whd/overtime/fs17d_professional.pdf, https://www.dol.gov/whd/overtime/fs17e_computer.pdf, https://www.dol.gov/whd/overtime/fs17f_outsidesales.pdf, https://www.dol.gov/whd/overtime/fs17h_highly_comp.pdf, https://www.dol.gov/whd/overtime/fs17g_salary.pdf

About the Author

Robert Howard

Rob Howard joined Bos & Glazier after serving as a law clerk for the firm during his studies at Western Michigan University's Cooley Law School, where he graduated cum laude.  Rob also attended Wayne State University Law School before transferring to Cooley.  While at Cooley, Rob earned multiple "book awards" for achieving the highest score in some of his law school classes. Before attending law school, Rob served as a police officer for the City of Grand Rapids where he was active with the union for the GRPD. A Grand Valley University alum, Rob earned a Bachelor of Science degree in Political Science. Rob is a member of the State Bar of Michigan and the Grand Rapids Bar Association.

Comments

There are no comments for this post. Be the first and Add your Comment below.

Leave a Comment

Our Firm

Bos & Glazier is dedicated to supporting our clients in all cases, no matter the size. We are court room lawyers who use cutting-edge, sophisticated resources both in trial and behind the scenes.

What Our Clients Say

The following quotes from several of our clients will help you understand the commitment Bos & Glazier makes to each and every client it represents.