Bright Idea Newsletter – September 2011
Exempt or Non-exempt? That is the Question!
Have you wondered whether or not your overtime policies were compliant with the Fair Labor Standards Act? You’re in luck. Here is a WAGE and HOUR OVERTIME EXEMPTION CHECKLIST for ADMINISTRATIVE POSITIONS based on the FLSA regulations to help you determine the answer to The Question.
Administrative Operations include: Tax, Finance, Accounting, Budgeting, Auditing, Insurance, Quality Control, Purchasing, Procurement, Advertising, Marketing, Research, Safety and Health, Personnel Management, Human Resources, Employee Benefits, Labor Relations, Public and Regulatory Compliance, and similar administration activities. (Administrative duties must be of a high-level and must not include routine or structured tasks such as bookkeeping, data tabulation, or other clerical duties.
*To qualify for the Administrative Employee Exemption, all of the following criteria must be met:
1) The employee must be compensated on a salary or fee basis of not less than $455 per week or $23,660 per year. By definition, salary or fee basis means the employee regularly receives a predetermined amount of compensation each pay period. The predetermined amount cannot be reduced because of variations in the quality or quantity of the employee’s work.
2) The employee’s primary duty must be the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers; and
3) The employee’s primary duty must include the exercise of discretion and independent judgment with respect to matters of significance.
In other words:
- Employees who are exempt from overtime payments MAY NOT have their pay reduced for partial days worked. Reductions of whole day absences may occur in compliance with the deductions outlined by the wage and hour regulations. Failure to comply with these criteria jeopardizes the overtime exemption.
- Determination of an employee’s primary duties must be based on all the facts in a particular case with the major emphasis on the content of the employee’s job as a whole.
- The employee must exercise discretion and independent judgment with respect to matters of significance as opposed daily routine decisions. An employee does not meet this requirement merely because the employer will experience financial losses if the employee fails to perform their job properly. Independent judgment and discretion involves the comparison and evaluation of possible courses of action and having the authority to make an independent choice, free from immediate direction. It must be more than the use of skill in applying established techniques, procedures, or specific standards that may be described in manuals, guidelines, or software packages.
*Note: The evaluation and overtime exemption determination provided above assumes that the employee’s job description is an accurate representation of the employee’s duties, responsibilities, and skills. If the determination indicated the job is eligible for the overtime exemption, employees with this job title but who are not performing the duties or do not have the skills as outlined in the job description, may not be eligible for the exemption. Job titles do not determine exempt status. In order for an exemption to apply, an employee’s specific job duties and salary must meet all the requirements of the Department of Labor’s FLSA regulations.
Why is this important? Significant fines may be levied by the Department of Labor if you are audited and your employees are not categorized correctly.