While we regularly discuss many of the nuances of wage and hour law generally and the Fair Labor Standards Act in particular here on the blog— it is also important to focus on the basics. Periodically over the next several months, as the Department of Labor gets ready to issue revised FLSA regulations, we will take a look at some of the more fundamental concepts of the FLSA. Since we just covered the basics of when the FLSA and related state laws apply to employers, we will start our review with the white collar exemptions. Remember that these are just the basics: the application of these rules is where the rubber really meets the road for employers.
This week, I want to focus on the basics of the FLSA’s overtime requirements. In addition to mandating a minimum wage, the FLSA requires that employers pay employees overtime - at least straight time plus one-half of their "regular rate" of pay for every hour they workweek in excess of 40 hours in a particular workweek. 29 U.S.C. § 207(a). The FLSA and its interpretative regulations published by the DOL, however, exempt certain groups of employees from the overtime pay requirements. One such exemption, and by far the most commonly used, relates to employees working in jobs that the FLSA describes as executive, administrative, or professional—the so-called "white-collar" exemptions. 29 U.S.C. § 213(a)(1). It is these exemptions that we predict will be the focus of the DOL's upcoming revisions to the FLSA regulations.
In order for employees to fall within one of the white-collar exemptions, they must perform executive, administrative, or professional duties (the "duties" test) and make a certain weekly salary (the "salary basis" test) —often described as the "salary-duties" test. A combination of exempt duties may also satisfy the duties test. The employer has the burden of proving both elements of the test—non-exempt status is considered the default—and courts narrowly construe the white-collar exemptions.
Exempt Duties: Administrative
- To currently qualify for the administrative exemption under the FLSA, an employee must meet all of the following criteria:
- The employee must be compensated on a salary or fee basis (as defined in the regulations) at a rate of at least $455 per week.
- 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 The employee's primary duty includes the exercise of discretion and independent judgment with respect to matters of significance. 29 C.F.R. § 541.200.
The regulations also explain that "employees who simply apply well-established techniques or procedures described in manuals or other sources within closely prescribed limits to determine the correct response to an inquiry or set of circumstances" do not satisfy the exemption.
Exempt Duties: Executive
To currently qualify for the executive exemption under the FLSA, an employee must meet all of the following criteria:
- Again, the employee must be compensated on a salary or fee basis (as defined in the regulations) at a rate of at least $455 per week.
- The employee's primary duty must be the management of the enterprise or a recognized subdivision of the enterprise;
- The employee must customarily and regularly direct the work of at least two employees; and
- The employee must have the authority to hire, fire, and promote employees or make such personnel recommendations that hold weight with the employer. 29 C.F.R. § 541.100.
Common positions held by executive employees include business owners, managers, and vice presidents. However, title alone will not ensure that the employee qualifies for the exemption – this will still be determined by the facts.
In the next post in our series, we will look at the professional duties exemption and one basic, important distinction between the FLSA and many state laws.