Salaried but Not Exempt

I’ve gotten several emails in the past few weeks regarding the articles posted recently. Most of the mail has been in reference to the possible early release of new rules regarding who qualifies for exempt status from overtime in the US. At the risk of confusing things even more, I’m going to attempt to muddy the waters in hopes that you will know what you don’t know and ask the right questions. (huh? What does that mean?)

First of all, nothing talked about here should be taken as legal advice. Everyone’s situation is different. No two gins are exactly alike in what duties are carried out by whom. These are merely guidelines to help you know what questions you need to ask and what google searches to perform. Before making any decisions on overtime, please do your own research and if necessary consult an attorney who practices in this highly specialized area.

There are really only two classifications of employees, exempt and non-exempt. These are NOT the same as salaried and hourly employees. Many times Salaried and Exempt are used interchangeably and they are definitely NOT the same thing. Exempt and Non-Exempt are legal status based on duties and not how someone is paid. Lets first look at what qualifies as exempt then we can look at the how someone gets paid. This discussion will be with the currently enforced rules not the proposed rules that we expect later this month.

Who is exempt? There are really three types of jobs that we normally look at in gins as exempt from overtime. Highly Paid (over 100K) are almost always considered exempt from overtime. I guess you could have hourly get there but rare. The most common for gins are the executive exemption and the administrative exemption (outside sales and computer specialist are also there but not common in gins). These two are going to be tied to what the employee actually does.

The exempt executive must be paid a minimum of $455 per week and be paid on a salaried basis. They must have supervisory responsibility for two or more employees. They must have management as a primary duty in their job and they must have input in to personnel matters. Direct hiring and firing isn’t always necessary but they must have significant input such as recommending hiring or promotions as well as disciplinary decisions.

Mere supervision ins’t enough. The Fair Labor Standards Act (FLSA) lists a number of duties that are considered management. Things like Interviewing, selecting and training employees; apportioning work; maintaining production records (beyond clerical work); ensuring regulatory compliance; disciplining employees; determining productivity rates; and several others are specifically listed. Often it is determined by if someone calls asking for the “boss” is the phone passed to this person. Most gins the manager will qualify as either highly paid or exempt because of management responsibilities and duties. Some times the plant superintendent (or head ginner) can qualify as well but that’s normally not the case.

The final exemption and probably one that we get the most questions about is that of administrative employees. Again, to qualify for this one the employee must be paid a minimum of $455 per week and paid on a salaried basis. Unfortunately, this by-itself will disqualify many. The administrative employee must do office work that is directly related to the management or general business operations of the employer and as a primary component of this work exercise independent judgement and discretion on matters of significance. So someone whose job is merely clerical will not qualify. Many times the office manager will qualify but occasionally they will not. I was called once by someone with the title of office manager but following a wage and hour audit was found to have a job that was only clerical in that she couldn’t make any decisions without going to someone higher up. There was no independent judgement component.

If an employee doesn’t meet one of these criteria, they are likely a non-exempt employee. They must be paid overtime (1.5X regular rate of work) for work done over 40 hrs each week. What about salaried employees you ask… Well that’s next.

Salary is a way to pay someone an equal amount each pay period in exchange for an expected number of hours of work. It is my understanding that to be paid a salary, the employee must also get minimum $455 per week. Typically the employer must keep track of the number of hours worked so that it can be proved that the employee worked no more than 40 hours per week without getting overtime. There is no requirement for a punch clock or time sheet for these folks if the employer can definitively recreate the time on and off duty each week. Your counsel will very likely want such documentation though to make accounting easier.

So someone can be paid a salary but not be exempt from overtime. There are lots of websites that will explain how to calculate “regular” rate of pay for those times that non-exempt but salaried workers work more than 40 hrs. I will let you dig to find those as it is a bit more complicated than a simple calculation. You will need to pay those non-exempt employees 1.5X the regular rate of pay for hours over 40.

I know this is all confusing but with new rules coming out soon you will want to get familiar with this situation so you can be prepared.