Legal Ease
Are Your Salaried Employees Truly Exempt?
by Richard D. Alaniz T
here are individuals in every workplace in the United States who are paid a salary and considered
exempt from pay for overtime after forty hours in a work week. While the issue of whether employees are properly classified as exempt is always an issue that could potentially arise, exempt status is more likely to be called into question if and when the Department of Labor (DOL) goes forward with a proposed increase in the salary amount required to qualify as exempt. It has been reported that such a proposed rule could be issued in early 2019. Therefore, now might be a good time to discuss some of the issues likely to arise if the salary amount is changed. In May 2016, the DOL proposed to
more than double the current $23,660 per year threshold for exempt status. The proposed increase to $47,476 was effectively blocked by court action. It remained blocked as the Trump administration took office and remains so today. The new Secretary of Labor, Alex Acosta, early in his tenure stated that a revised rule would likely be issued at a later date. He also commented that while he did not support such a drastic increase, some increase was needed to keep pace with business reality. The last change occurred in 2004. According to some reports, any new rule is likely to propose a salary threshold in the range of $31,000 to $33,000 or so. This would require that an exempt employee be paid a weekly salary of approximately $600 versus the current salary threshold of $455 per week.
How Does an Employee Qualify as Exempt from Overtime? To be properly classified as exempt, the person must satisfy the two part, “salary” and “duties”, tests. The person must be paid at or above the required salary level (currently $455 per week)
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and the duties of the employee must fall within one of the so-called “white collar exemptions”. They are generally referred to as the “executive”, “administrative” and “professional” exemptions.
Executive Exemption For the “executive” exemption to apply, the person’s primary duties must be management of the enterprise or a customarily recognized department or subdivision thereof. The person must also direct the work of two or more other employees, and have authority to hire or fire employees or have particular weight given to his or her recommendations on employee issues. The most common positions falling under the executive exemption are business owners or managers, department managers, and supervisors.
Administrative Exemption The “administrative” exemption is the one most commonly used by businesses to classify employees as exempt and also the one most frequently litigated. To qualify, it requires the requisite salary and that the person perform office or non-manual work directly related to the management of the business. In addition, the employee must exercise discretion and independent judgment on significant matters. One way of considering the basis for the exemption is to make the distinction between “production” work and “administrative” work. However, not all “administrative” work is considered exempt. The exemption would not apply to an employee responsible for performing duties that involve clerical or secretarial work, answering phones, filing or performing other repetitive and routine office work. Some of the well-recognized exempt administrative positions include human resources personnel, purchasing agents, insurance
claim adjusters, office managers, payroll managers and executive assistants to business owners.
Professional Exemption In considering who qualifies as an exempt professional employee, the DOL recognizes four separate categories: “learned professionals”, “artistic or creative professionals”, “teachers” and employees engaged in the practice of law or medicine. Most businesses will have few, if any employees who qualify as a professional. If they do, such as engineers, the basis for exempt status is usually clear. They will have a college degree or comparable training qualifying them as a professional in their area of expertise.
Computer Professionals The DOL also recognizes certain computer professionals as exempt. The FLSA actually has two separate exemptions for these types of employees. In addition to an exemption with the same salary level as that of other categories, $455 per week, there is also an exemption for computer employees who are paid at least $27.63 per hour. The types of employees that qualify for these exemptions are computer system analysts, computer programmers, software engineers and other similarly skilled professional employees. The exemption does not apply to persons whose duties are to install, upgrade, or maintain computer station software or to those who install hardware and cable for their employer’s local area network. Unless they have the educational/ professional background, the company’s general I.T. employees do not qualify for the exemption.
Final Thoughts on the Overtime Exemption When the administration finally
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