Q&A with employment law expert Richard Lehr
I’m confused by all the regulatory and court rulings surrounding overtime exemptions. What is the salary threshold for an employee to be exempt from overtime?
Despite efforts by the previous administration, overtime regulations under the U.S. Fair Labor Standards Act remain the same as they have been since 2004. For an employee to be exempt from overtime, they must make at least $455 weekly, which translates into an annual salary of $23,660. Salary is just part of the equation though. It is the job duties test that trips up most employers. Retailers should determine whether employees currently classified as exempt from minimum wage and overtime truly meet the exempt status. Job title is the least important factor for an exemption. Exemptions are like tax deductions, it’s the burden of the taxpayer to prove the validity of the deduction. It’s the burden of the employer to prove the validity of the exemption. You’re not required to treat employees over a certain salary as exempt, but if you do, be sure to check its done properly. Otherwise, you risk owing a lot of money.
Aren’t all managers considered exempt employees?
No. Executive employees are just one of the categories of employees who can qualify as exempt. This exemption may include managers. For an executive exemption:
- An employee’s primary duty must be management.
- The employee must direct the work of at least two or more other full-time employees.
- The employee must have the authority to hire or fire other employees, or that employee’s suggestions and recommendations to hire or fire must be given particular weight and deferred to regularly.
Isn’t there an exemption for administrative employees too?
An administrative employee exemption is one of the most difficult to sustain. The primary duty must be office or non-manual work that relates directly to management and the individual must exercise independent judgment and discretion concerning matters of significance. For example, an office manager may reorder product that cost several thousands of dollars, but that does not require independent judgment and discretion. However, if the employee evaluates bids from different providers, negotiates with them and makes a recommendation to the employer, then that is closer to the discretion and independent judgment necessary for this exemption. Office or administrative employees often deal with important, confidential matters. That does not mean they are exempt.
May an employee qualify for an exemption as a “professional?”
The professional employee exemption is where the work requires advanced knowledge in science and learning, which includes work requiring the consistent exercise of discretion and judgment. This is customarily acquired by a prolonged course of specialized intellectual instruction, such as a college degree. The degree must be related to the field of study used on the job. For example, a college graduate with a degree in history is not an exempt professional simply because of that degree. There is also a professional exemption for an employee in a creative, artistic job, such as a fashion designer. The work has to be original. Thus, a designer of “knock-offs” is not considered an exempt professional.
May commission paid sales employees qualify for exempt status?
A commission sales employee of a retail or service establishment may be considered exempt, provided more than one half of the employee’s earnings are from commissions and the employee must earn at least time and a half of the minimum wage for every hour worked.
Are there other employees who may qualify for exempt status?
There are exemptions for computer professionals, outside salespersons and employees in certain industries.
May I dock an exempt employee’s salary?
The opportunity to do so is limited. The general rule is that an exempt employee may not be docked in anything less than full-day increments. One exception is if the exempt employee is absent for part of a day due to a FMLA-related reason, the pay may be docked. Otherwise, deductions must be in minimum full-day increments. There are Department of Labor rules that address when an exempt employee’s salary may be docked. An improper deduction from an exempt employee’s pay risks nullifying the exemption and subjecting the employer to back pay.