Did you know salaried employees may not have an exempt status according to the Fair Labor and Standards Act (FLSA)?

An employer, deciding about the exempt/non exempt status of an employee, who takes prohibited deductions, puts employees' exempt status at risk--meaning those employees potentially could be entitled to minimum wage and overtime for all hours they worked, going back at least two years

Who can get an exempt status anyway? Three criteria must be met before an employee can be classified as exempt according to the labor standards act.

 

1.       The employee must make at least a certain minimum-salary level.
·      The employee must earn a salary of at least $455 per week ($23,600 annually). If an employee does not earn at least this amount, the employee is not exempt and is entitled to minimum wage and overtime. Certain highly-compensated employees who earn at least $100,000 annually may also qualify as non-exempt.
 
2.       The exempt status employee must be paid on a salary basis.
·       The employee must receive a predetermined amount of compensation each pay period.
 
·       While a pre-set salary is the norm, the regulations allow an employer to compute an exempt employee's earnings on an hourly, daily or shift basis if the employer guarantees at least $455 per week as a salary regardless of the number of hours, days or shifts worked and if a reasonable relationship exists between the guaranteed amount and the amount actually earned.
 
·       Other than certain very specific deductions, the employee must receive at least his or her full salary for any workweek in which the employee performed any work.
 
·       Note: The salary-basis test does not apply to outside sales employees, teachers and those practicing law or medicine. In addition, computer-tasked employees can be paid on either a salary or hourly basis.
 
3.       The employee must perform executive, administrative, professional, outside sales or computer job duties.
·         To be exempt, the work the employee performs must meet one of the job-duties tests, the most difficult test to pass.
 
·       The most common job-duties test applicable to managers-supervisors is the executive-job-duties' test. Under this test, the employee must:
 
1.     manage the enterprise or manage a department or subdivision,
 
2.     customarily and regularly direct the work of at least two or more other full-time employees (or the equivalent), and,
 
3.     have the authority to hire or fire employees, or have his or her recommendations on hiring, firing, promotion or other changes in job status be given "particular weight."

Modern Business Associates assist clients with determining the exempt/non-exempt status for their employees. As a HR outsourcing organization, our clients rely on us to help them effectively deal with these kinds of issues.