Exempt vs. Nonexempt: Understanding FLSA s Employee Classification Standards Presented by Don Feltham
FLSA» 2013 marked the 75th anniversary of the enactment.» Exempt vs. nonexempt» Twists on the issues» Be mindful of where you re located.» Get advice and guidance for quirky issues.
OVERVIEW The FLSA: 1. Established a minimum wage 1938
10 STATES With Minimum Wages Linked to Consumer Price Index
OVERVIEW The FLSA: 1. Established a minimum wage 2. Made it more expensive for employers to work employees long hours rather than bringing people off the unemployment lines 1938
OVERTIME California, Alaska, Nevada, Puerto Rico, and the U.S. Virgin Islands require overtime for work > 8 hours per day.
OVERVIEW The FLSA: 1. Established a minimum wage 2. Made it more expensive for employers to work employees long hours rather than bringing people off the unemployment lines 1938 3. Prohibited long working hours for children younger than 18
Equal Pay Act 1978
1. Interstate motor carrier, airline, and railroad employees 2. Outside buyers of poultry and dairy products 3. Seamen 4. Motor-vehicle dealer sales and service personnel 5. Trailer, boat, or aircraft dealer salespeople not working for a manufacturer 6. Certain local delivery drivers and helpers 7. Agricultural employees 8. Individuals engaged in the initial transportation of fruits and vegetables from a farm 9. Taxi drivers 10. Employees of police and fire departments with fewer than 5 employees 11. Movie-theater employees XEMPTION
Certain employees of amusement or recreational establishments located in national parks Bulk or wholesale petroleum distributors Employees receiving literacy training up to 10 hours per week Hospital or nursing-home employees if paid overtime for more than 8 hours per day or 80 hours during a 14-day period Public fire protection personnel may be paid for a consecutive 28-day work period after 212 hours of work. Law enforcement may be paid overtime for a consecutive 28- day work period after 171 hours of work. PARTIAL EXEMPTION
Tests Individual coverage
Tests Enterprise coverage
Changes Made by the 2004 DOL» Elimination of the Long and Short Tests» Updated salary requirements» Elimination of the 20% nonexempt work limitation» Full-day docking for serious disciplinary reasons» Separation of the professional exemption into learned and creative categories» Addition of a highly compensated exemption
Categories of Exemption Salary test Primary duties test Managers, directors, executives, officers, etc. 1. Executive
Categories of Exemption Salary test Primary duties test 2. Administrative
1. Whether the employee has the authority to formulate, affect, interpret, or implement management policies 2. Whether the employee carries out major assignments 3. Whether the employee s work substantially affects business operations 4. Whether the employee has authority to financially commit the employer 5. Whether the employee has authority to waive or deviate from policies 6. Whether the employee has the authority to bind the company Factors to Consider
7. Whether the employee provides consultation to management 8. Whether the employee is involved in planning business objectives 9. Whether the employee investigates and resolves matters of significance on behalf of management 10.Whether the employee represents the company in handling complaints Factors to Consider
EXEMPT NONEXEMPT GRAY AREA Senior administrative Entry-level clerical administrative
Categories of Exemption Salary test Primary duties test 3. Professional (Learned)
Categories of Exemption Salary test Primary duties test 3. Professional (Creative)
Categories of Exemption Salary test Primary duties test 4. Computer-Related
Categories of Exemption Salary test Primary duties test 5. Outside Sales
Categories of Exemption Salary test Primary duties test 6. Highly Compensated
Compensating Exempt Employees
Docking Exempt Employee Pay EXCEPTIONS:» Personal absences» Sickness or disability» Serious disciplinary reasons» Life-threatening safety violations» Commencement of FMLA leave» Joining or leaving the work force midweek
Full-week docking is acceptable for:» Jury or subpoenaed witness duty» Military service» Work-site closings resulting from weather or mechanical failures SICK TIME
DOL has interpreted employees as working when checking email and/or voice mail outside the office.
168-hour workweek $7.25 per hour 7 Basic Rules for Nonexempt Employee Classification 1. Minimum wage and overtime requirements
7 Basic Rules for Nonexempt Employee Classification 2. Compensatory time off (private sector)
It must be voluntary. It must be accrued at timeand-one-half. 240 hours for nonemergency personnel, and 480 hours for emergency personnel Excess paid in cash 7 Basic Rules for Nonexempt Employee Classification 3. Compensatory time off (public sector)
7-minute rounding 7 Basic Rules for Nonexempt Employee Classification 4. Rounding starting and stopping times
Minimum of $2.13 per hour Minimum of $7.25 per hour including tips 7 Basic Rules for Nonexempt Employee Classification 5. Tip credits
7 Basic Rules for Nonexempt Employee Classification 6. Discretionary vs. nondiscretionary bonuses
7. Record-keeping requirements 7 Basic Rules for Nonexempt Employee Classification
Nonexempt Employees 1. Unauthorized overtime
Nonexempt Employees 2. Preliminary and postliminary work
Nonexempt Employees 3. Waiting, on-call, and standby time
Nonexempt Employees 4. Meal and rest periods State requirements available at www.dol.gov
Nonexempt Employees 5. Sleeping time Uninterrupted sleep for at least 5 hours
Nonexempt Employees 6. Training and education time 4 Criteria: 1. Outside of normal work hours 2. Voluntary participation 3. Not job-related 4. No work is performed concurrently
Nonexempt Employees 7. Travel time
FLSA ISSUES IN THE NEWS AND COURTS In 2008:» 23,000 complaints received» Back wages of $185,000,000 for over 228,000 employees» WHD assessed over $9.9 million in penalties for violations» Average of 97 days to resolve a case» New screening processes
1. Minimum wage for federal contractors 2. Minimum wage 3. Living wage actions by municipalities 4. Focus on low-wage industries 5. Independent contractors 6. Use and payment of interns 7. Pay equity 8. Obama s directive to DOL regarding exemptions EMERGING ISSUES
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