Don’t Fall Prey to an Incomplete Overtime Exemption Analysis

The Department of Labor’s (DOL) final rule increased the levels of salary required to be paid to employees to qualify for certain exemptions from overtime under the Fair Labor Standards Act (FLSA). Some employers have mistakenly interpreted the DOL’s final rule as setting the only standard for overtime exemption, believing that if the minimum salary level is met no overtime is required to be paid to an employee. However, the DOL did not alter the requirement that before an overtime exemption will apply, the employee must perform exempt duties as defined by the DOL.

The FLSA establishes the federal minimum wage and requires that employees be paid at one and one half times their regular rate of pay for each hour worked over 40 in a workweek. In general, it should initially be presumed that all employees, regardless of how paid (salary, hourly, commission, etc.) or how much they are paid, are entitled to overtime for hours worked over 40 in a workweek.

The FLSA empowers the DOL to recognize certain work exemptions from overtime and to establish the criteria for qualifying for the exemptions. The DOL overtime exemptions include bona fide executives, administrators, outside sales, professionals, computer specialists/programmers, and highly compensated employees. Importantly, for an employee to qualify for any of these overtime exemptions two general criteria must be met: (A) the employee must be paid the minimum salary required by the DOL for the exemption, and (B) the employee’s work duties must be those that meet the requirements of the exemption.

Both criteria must be met in order for someone to be exempt from overtime. If an employee performs exempt duties but is not paid the minimum salary for establishing an overtime exemption, the employee must be paid overtime. Similarly, if the employee is paid the minimum salary required for exempt status but the employee’s duties are not those recognized by the DOL as being exempt, the employee must be paid overtime despite being paid a substantial salary.

The exemptions from overtime are to be narrowly construed and applied. The DOL’s changes in the minimum salary for overtime exemptions should not be interpreted as lessening the requirement that employees must perform exempt duties as well as receiving a minimum salary.

As employers consider the effect that the new minimum salary levels for exempt employees has on payroll and overhead costs, and contemplate the best means to incorporate the changes, it is also a good time to review the actual duties performed by employees to ensure they meet the standards necessary for exempt status.

Of course, this is not an exhaustive discussion of the Final Rule. For more information on this topic, email or call Keith Sieczkowski, Labor & Employment Lawyer with BRANSCOMB LAW, at ksieczkowski@branscomblaw.com or (361) 886-3800.