Can you believe it’s already the end of another workweek? Once again, time went speeding by me like a new Corvette on the Autobahn (check out last week’s post). So, before we get too far into 2020, I want to discuss one of my favorite compliance topics. Wait! Don’t go; it’s not about I-9 forms this time! This week’s post is about exemptions from minimum wage and overtime. If you recall, I briefly discussed the new minimum salary requirements for exempt employees in the January 11, Fridays with Frank. So, let’s dive into some details!
To be (exempt), or not to be (exempt), that is the question! For some, trying to sort out and understand the Fair Labor Standards Act (“FLSA”) “white collar” exemptions is worse than writing a 15-page book report on Macbeth! (My apologies to Shakespeare and Mrs. Maio, my 10th grade English teacher and sister.) Yes, the federal rules are both complex and vague, and some states have different but equally complex and vague rules. But, on the bright side, there are very strange people like me who love this stuff and are here to help!
First, “exempt” means the law’s minimum wage and/or overtime requirements do not apply. Conversely, “nonexempt” means the law’s minimum wage and overtime requirements do apply. Lesson one complete!
Federal vs. state-specific compliance. From the federal perspective, Section 13(a) of the FLSA provides exemptions from both minimum wage and overtime pay for employees correctly classified as executive, administrative, creative or learned professional, outside sales, and highly-compensated employees. To qualify for an exemption, employees must meet tests regarding their job duties and be paid at least $684.00 per week on a salary basis. It’s important to note that the employee’s actual job duties—not their title—are used to determine whether an exempt classification is applicable.
In states with their own overtime exemption laws—yes, I’m looking at you CA, ME, and NY—employers must comply with the law that provides the most benefit to the employee. That’s why, for example, employers must pay the higher state-specific minimum salary amounts I discussed in a previous post. But that’s not all!
ME: The Pine Tree State follows the underlying construct of the FLSA’s three-prong test for the executive, administrative, and professional exemptions. 1. The employee must be paid on a salary basis—paid a predetermined amount of compensation each pay period. 2. The employee’s salary must meet or exceed the higher of the state or federal minimum salary threshold. 3. The employee’s job duties must meet the FLSA’s criteria for either the executive, administrative, or professional exemption.
However, the state does break from the FLSA in two important ways. First, the ME statute covers businesses operating in the state with one or more employees. (The FLSA has thresholds to determine if an employer is covered.) Secondly, unlike the FLSA, which identifies several exemptions (computer professionals, movie theater employees, certain wreath makers, maple sap processors, seamen on a foreign vessel, etc.), ME law identifies just three exemptions—executive, administrative, and professional. Further, the state’s DOL explains that, while ME law is silent on some FLSA exemptions, others are expressly prohibited. Employers unaware of this fact could be misclassifying employees under state labor law.
NY: Not to be outdone, NY has its own complex web of wage and hour rules and restrictions. In the Empire State, overtime requirements apply to all individuals who fall within its definition of “employee.” State labor law defines an “employee” as “any individual employed or permitted to work by an employer in any occupation,” excluding only those specifically identified as exempt. That list includes exemptions for executive, administrative, and creative/learned professionals (as well as outside salespeople; federal, state, and municipal employees; taxi drivers, camp counselors, and part-time babysitters, but no wreath makers or maple sap processors).
To further complicate matters, NY employers should be aware that the duties tests for the state’s executive and administrative exemptions are slightly different from those under the FLSA. This could result in some employees being exempt under federal law, but failing the duties test under state law. In that case, the individuals must be classified as nonexempt hourly employees and paid overtime for all time worked over 40 hours in a workweek. Another strange point is that the creative/learned professional exemption does not have a salary basis or minimum salary test, only a duties test.
Confused? Overwhelmed? Want a cocktail? (Sorry, that last question was for my wife.) You’re not alone. Wage and hour laws are complex and are only going to get more complicated from here. What’s worse, employers aren’t allowed to make mistakes and face the payment of back wages and overtime, as well as astronomical fines, penalties, and legal fees when they do. (Caution, shameless self-promotion ahead!) That’s how I came up with our firm’s tagline: When you only have once chance to get it right, you need HR Compliance Experts. But, all joking and shameless self-promotion aside, if your head is spinning from all this, we’re here to help.
That’s a wrap on another Fridays with Frank. Thanks for spending a small part of your day with me, and have a great weekend!
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Please feel free to contact Frank at firstname.lastname@example.org, or 585-380-1566 with questions or for more information.
Disclaimer: This content is for informational purposes only, does not constitute a legal opinion, and is not legal advice. The facts of each situation should be considered and analyzed individually. Therefore, you should always consult with competent employment counsel regarding any issues discussed here.
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