I’ve received this question from several blog readers and clients recently, and on its face it makes some sense. After all, you don’t pay full salary to someone who is only working for you part-time, so it only makes sense that the minimum salary for the executive, administrative and professional exemptions under the FLSA should also be pro-rated based on how many hours an employee works. Right?
Well, not so much.
For most employees, the exemptions apply only if an employee meets three broad requirements: they perform exempt duties, they are paid at least a certain minimum weekly salary, and they are paid on a salary basis. It’s that last requirement – salary basis – that explains why the anticipated new exemption rules won’t allow employers to pro-rate the increased minimum salary. The idea here is that exempt employees aren’t being paid by the hour at all. They get paid the same amount – at least the established minimum – every workweek, regardless of how many or how few hours they work. Pro-rating the minimum salary would inherently place part-time exempt employees back in the bucket of being paid according to their work hours, something that is contrary to the current exemption tests. While one could come up with different ways of re-writing the salary rules to allow this, the DOL did not include any such proposal in its Notice of Proposed Rulemaking. The odds of this administration slipping such a major, employer-friendly change into the final rules are roughly on par with the chances of me suddenly re-sprouting a full head of hair. You might be able to imagine it, but don’t hold your breath.
So what should employers who currently have part-time exempt employees earning below the expected new minimum salary of $970 (or maybe a bit less) per week do?
In many cases, the answer is: nothing. If someone is a part-time employee working well under 40 hours per week, they’re probably not working many overtime hours. It’s perfectly legal under the FLSA to pay a flat salary to a non-exempt employee who works no overtime, so long as the salary divided by the total number of hours worked each workweek satisfies the minimum wage. If one of these employees works overtime in a given week, you do have to pay overtime for that week.
The main issue for many of these employees won’t be the cost of overtime so much as having to track actual work hours and manage employee schedules to avoid unnecessary overtime. While that can certainly be a headache, it can be done. The key is good planning, communication, and management. (Train your supervisors!)