Operations

Labor Laws: Pay Fair or Pay Up

Posted on August 1, 2010

WHO IS COVERED

The Act applies to enterprises with employees engaged in interstate commerce, produce goods for interstate commerce, or handle, sell, or work on goods and materials that have been moved in or produced for interstate commerce. Transporting passengers over state lines or providing continuation of travel of a passenger arriving at an airport from another state qualifi es as interstate commerce. The Act exempts some administration employees from overtime pay and minimum wage requirements. For more information visit the Wage and Hour Division web site at http://www.dol.gov/whd/america2.htm.

SALARY VS. HOURLY
Many employers falsely believe that by paying an employee a fi xed salary that it exempts them from paying overtime simply because the employee is “salaried.” This is not the case. Employees may be paid a salary because it might be more convenient to the employer than to track daily hours. As long as the salary paid is equal to or more than minimum wage, it is acceptable and legal. However, these employees are still entitled to overtime for any time worked over 40 hours in a week unless they are covered by an “exemption” based on their primary duties.

EXECUTIVE EXEMPTION
To qualify AS a company “executive,” all of the following tests must be met:
• The employee must be paid a fi xed salary of not less than $455 per week.
• The employee’s primary duty must be management.
• The employee must regularly direct the work of at least two or more full-time employees.
• The employee must have authority to hire and/or fi re employees or provide recommendations on hiring, firing, advancement, and promotions.

ADMINISTRATIVE EXEMPTION
To qualify as an exempt administrative employee, all of the following tests must be met:
• The employee must be paid a fi xed salary of not less than $455 per week.
• The employee’s primary duty must be the performance of offi ce work related to management or general business operations.
• The employee’s primary duty must include exercising discretion and independent judgment with respect to matters of significance.

PROFESSIONAL EXEMPTION
To qualify as a company “professional,” all of the following tests must be met:
• The employee must be paid a fi xed salary of not less than $455 per week.
• The employee’s primary duty must require work which is predominantly intellectual in character and includes work requiring the consistent exercise of discretion and judgment.
• The advanced knowledge must be in a field of science or learning.
• The advanced knowledge must be customarily acquired by a prolonged course of specialized instruction.

OUTSIDE SALES EXEMPTION
To qualify as an outside sales representative, all of the following tests must be met:
• The employee’s primary duty must be making sales or obtaining orders or contracts for services.
• The employee must be regularly engaged away from the employer’s place of business.

HIGHLY COMPENSATED EMPLOYEE EXEMPTION
Highly compensated employees performing office or non-manual work and paid total annual compensation of $100,000 or more are exempt from the FLSA if they regularly perform at least one of the duties of an exempt executive, administrative, or professional employee.

COMPLIANCE ASSISTANCE
More detailed information about the FLSA, including copies of explanatory brochures and regulatory and interpretative materials, is available on the Wage and Hour Division’s web site: http://www.dol.gov/whd/

DOL CONTACTS
Wage and Hour Division
http://www.dol.gov/whd/
Contact WHD
http://www.dol.gov/whd/contactform.asp
Tel: (866) 4USWAGE
(866) 487-9243)
TTY: (877) 889-5627

 

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