As we have discussed in previous articles, the world of employment law is filled with surprises and potential liability for employers. One area that deserves mention is the question of whether an employee paid a “salary” is entitled to overtime pay. Surprising to many, the answer is yes, if the employee is considered non-exempt under the Fair Labor Standards Act. I sometimes wonder where the belief that if you are paid a salary, then you are not entitled to overtime arose, but I hear it often in my practice. Even more often, I will meet with a potential client who thinks that he/she has a discrimination claim only to discover that the strongest claim held by that individual is a wage and hour claim for failure to pay overtime.
For an employer to avoid potential Fair Labor Standards Act liability, they must analyze each position in its organization to determine whether that position is exempt or non-exempt under the act. The actual job duties performed by the employee in a particular position govern over a job title or erroneous job description. The Department of Labor lists the most commonly used exemptions as:
• Commissioned sales employees of retail or service establishments are exempt from overtime if more than half of the employee’s earnings come from commissions and the employee averages at least one and one-half times the minimum wage for each hour worked.
• Computer professionals: Section 13(a)(17) of the Fair Labor Standards Act provides that certain computer professionals paid at least $27.63 per hour are exempt from the overtime provisions of the act.
• Drivers, driver’s helpers, loaders and mechanics are exempt from the overtime pay provisions of the Fair Labor Standards Act if employed by a motor carrier, and if the employee’s duties affect the safety of operation of the vehicles in transportation of passengers or property in interstate or foreign commerce.
• Seasonal and recreational establishments: Employees employed by certain seasonal and recreational establishments are exempt from both the minimum wage and overtime pay provisions of the Fair Labor Standards Act. You may also wish to review the applicable regulation.
• Executive, administrative, professional and outside sales employees (as defined in Department of Labor regulations) and who are paid on a salary basis are exempt from both the minimum wage and overtime provisions of the Fair Labor Standards Act.
This list is not inclusive and is meant to express the type of work that is exempt, not just the position title.
If the position is non-exempt, then the employee is entitled to overtime for all hours worked in excess of 40 hours per seven-day workweek. Some states even require that employers pay overtime after eight hours per day (instead of after 40 hours per seven-day workweek). Let us say hypothetically that Company A failed to pay a non-exempt employee overtime. The first question some employers would ask is: Do we pay the employee a salary or an hourly wage? That is the absolute wrong question to ask. The right to overtime compensation has nothing to do with being paid a salary versus an hourly wage. The right line of inquiry is as follows: Is Company A’s business subject to the Fair Labor Standards Act, i.e. they work in interstate commerce and their annual volume of business exceeds $500,000? If so, then is the employee in question employed in a non-exempt position under the Fair Labor Standards Act and therefore entitled to overtime? And, if yes, did the employee work more than 40 hours per seven-day workweek? If yes, then the employee gets overtime.
The Fair Labor Standards Act is complicated and there are a number of exemptions that concern specific businesses. The problem is that employers cannot afford to consciously ignore the Fair Labor Standards Act as it comes with some serious teeth and can cost employers a lot of money on an otherwise relatively small claim due to liquidated damages and mandatory attorney fee provisions.
Michael Brownlee is a partner with Thompson, Brownlee & Voboril LLC, a local civil litigation firm. For more information, contact Brownlee at 970-455-4226, firstname.lastname@example.org or visit www.thompson brownlee.com.