FLSA Classification: Exempt vs. Non-Exempt

Wednesday, June 02, 2010

A common task for employee compensation professionals is the determination whether or not a position or an employee is considered “exempt “under the Fair Labor Standards Act (FLSA). This analysis determines if the employee is eligible for not only Federal minimum wage, but may affect eligibility for state minimum wage provisions. Several states have adopted their own version of minimum wage laws, which in some situations have a higher wage rate than the Federal minimum wage. Thus, in those cases where an employee is eligible for Federal and state minimum wage laws, the employee is generally entitled to the higher of the two. The Fair Labor Standards Act also controls eligibility for overtime pay. FLSA covered nonexempt employees must be paid for hours worked over 40 per workweek at one and one-half times the employee’s regular rate of pay.

FLSA requires a “facts and circumstance” analysis of the duties performed by incumbent employees to determine whether an employee or position is “exempt” from Federal minimum wage and overtime pay provisions of the law. Exemption from Federal minimum wage and overtime pay DOES NOT grant automatic exemption from any state or local wage and hour laws. In matters pertaining to Federal, state, and local wage and hour provisions, you should always consult with a qualified attorney or other labor law professional.

FLSA covered employees of organizations include any one, “engaged in interstate commerce, producing goods for interstate commerce, or handling, selling, or otherwise working on goods or materials that have been moved in or produced for such commerce”.

FLSA provides for limited exemptions from minimum wage and overtime pay provisions.

Executive

  Employee must be compensated on a salary basis at not less than $455 per week;
  Employee’s primary duty must be managing the organization or a recognized
  of the organization;
  Employee must regularly direct the work of other full-time employees or their
  equivalent; and
  Employee must have the authority to hire, fire, recommend advancement,
  promotion or other changes

Administrative

  Employee must be compensated on a salary basis at not less than $455 per week;

  Employee’s primary duty must be the performance of office or non-manual work and

  Employee’s primary duty includes the exercise of discretion and independent
  judgment

Professional

  Employee must be compensated on a salary basis at not less than $455 per week;

  Employee’s primary duty must be the performance of work requiring advanced
  knowledge;

  Advanced knowledge must be in a field of science or learning; and

  Advanced knowledge must be customarily acquired by a prolonged course of
  specialized study

Creative professional

  Employee must be compensated on a salary basis at not less than $455 per week;
  Employee’s primary duty must be the performance of work requiring invention,
  imagination, originality or talent in a recognized field of artistic or creative
  endeavor.

Computer Employee

  Employee must be compensated on a salary basis at not less than $455 per week;

  Employee must be employed as a computer systems analyst, computer programmer,
  software engineer;

  Employee’s primary duty must consist of:

    1) Application of systems analysis techniques and procedures;
    2) design, development, documentation, analysis, creation, testing, modification
       of computer systems;
    3) Design, documentation, testing, creation, modification of programs related to
        machine operating systems; or a combination of the aforementioned duties.

Outside Sales

  Employee’s primary duty must be making sales, obtaining orders or contracts; and
  Employee must be regularly engaged away from the employer’s place of business.

Highly Compensated Employees

  Highly compensated employees paid total annual compensation of $100,000 or more;
  Employees performing office or non-manual work; and
  Regularly perform exempt executive, administrative or professional employee duties.

Employees of certain seasonal amusement/recreational organizations

  Does not operate for more than seven months in any calendar year.

  33-1/3 % Test.

Farm workers

  Farm workers employed by anyone who used no more than 500 "man-days"
  of farm labor

  Employees who are employed in agriculture;

  Agricultural employees who are immediate family members of their employer;

  Those persons engaged on the range in the production of livestock;

  Local hand harvest laborers who commute daily from their permanent residence;

  Non-local minors, 16 years of age or under, who are hand harvesters.

Casual babysitters/companions to the elderly or infirm