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If all the answers are yes, then you likely have an exempt employee.  There are several other exempt employee factors that will be covered in the following newsletters.

Legally exempting employees from overtime.

Many people believe that if an employer simply pays their employee the same amount every week and calls that employee ‘salaried’, that employee is not entitled to overtime pay.  However, the employer cannot designate their employees as salaried by title and salary alone.  The Department of Labor, the Department’s regulations, and the Fair Labor Standards Act (“FLSA”) base the decision to exempt certain employees on job duties and salary, not salary and job title.

Employees may accept the ‘salaried’ or ‘exempted’ title while they are working for the business, but the FLSA permits employees to sue for overtime pay (and attorney’s fees) for up to three years after the most recent overtime violation.  In that situation, a terminated employee can cause many problems for an unwary employer.

Employers should be proactive about legal overtime exemptions so they will avoid surprises down the road.  The best policy is for an employer to determine if certain job duties and salary fit an exemption before the employee works over 40 hours a week.  The three top reasons to be proactive are:

  • It will be difficult to implement a change in policy after the employee has earned overtime without alerting employees to possible FLSA violations.
  • It is risky to continue to withhold overtime pay after the employer has determined an employee may be eligible for overtime.
  • Terminated employees have nothing to lose by suing for overtime pay or reporting former employers to the Department of Labor.
  • If The Department of Labor or a court determines you should have been paying overtime, you may have to pay additional administrative penalties, liquidated damages, and attorney’s fees that will surpass any temporary overtime savings.

In short, determining if a particular job is exempt from overtime compensation in advance is a better policy than hiring personnel first and dealing with the consequences later.

  1. Does your salaried employee get paid the same amount every pay period?
  2. Does your salaried employee exercise his/her own judgment based on education or experience on a regular basis?
  3. Does your salaried employee supervise two or more people on a regular basis?
  4. Does your salaried employee receive less than their regular pay if they take a few hours off a week?
  5. Does your salaried employee make more than $455.00 weekly?
  6. Does your salaried employee work outside of the office on a regular basis?
  7. Does your salaried employee have his/her pay docked for leaving early, taking long breaks, or coming in late?
  8. Does your salaried employee do primarily ‘white-collar’ work related to the management of your business?
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