FLSA Exempt: Everything You Need to Know
FLSA exempt refers to a provision in the law called, “The Fair Labor Standards Act” determining what jobs have exempt status versus nonexempt status.8 min read
2. FLSA Coverage
3. FLSA Coverage Exclusions
4. Exempt vs. Nonexempt
5. Salary Basis Test
6. The Duties Test
7. Executive Job Duties that are Exempt
8. Administrative Job Duties that are Exempt
FLSA exempt refers to a provision in the law called, “The Fair Labor Standards Act” which determines what jobs have exempt status and which ones have nonexempt status. This law addresses issues such as overtime pay, minimum wage, record keeping, number of hours an employee has worked, and employment standards for minors in places of employment and United States government agencies on the federal, state, and local levels and in the private sector. FLSA is administrated and regulated by the Department of Lobar (also known as the Wage and Hour Division of the Department of Labor). In 2014, FLSA was amended. The Fair Labor Standards Act (FLSA) is most commonly known as the law determining what employees are entitled to overtime pay and what employees are not as well as other general overtime requirements.
The FLSA governs the majority of jobs, however there are some jobs excluded from FLSA, due to statute. Any other job governed by the FLSA has “exempt” status from specific FLSA overtime regulations.
FLSA Coverage Exclusions
The FLSA usually does not apply when a certain job is under the governance of a separate federal labor law. For example, the Railway Labor Act governs railway workers and the Motor Carriers Act governs truck drivers. Other examples of workers that the FLSA does not govern include agricultural works and movie theater employees. If you want a complete list of employee who are not covered by FLSA, you can contact the Department of Labor.
Exempt vs. Nonexempt
Exempt employee means an employee who isn’t entitled to any overtime pay whereas nonexempt refers to employees who are entitled to overtime pay. An “outside sails” employee is an exempt employee, but an “inside sales” employee is a nonexempt employee. In almost all situations, exemption is based on the work an employee does, how they are paid for it, and the amount they are paid. To be exempt, an employee usually has to make at least $455 per week (or $23,600 a year), be salaried, and be assigned exempt job responsibilities. The United States Department of Labor has provided guidelines for exemption in the FLSA Regulations. If a person has to follow a manual and perform a series of intricate steps on the job, that employee is considered nonexempt. Aside from the FLSA, there are other wage and hour laws laid out by different states. If you plan to employee anyone, brush up on information regarding wage and hour laws on both the federal and state level.
There are many different classifications for workers in addition to exempt and nonexempt employees. These classifications include temps, interns, volunteer, independent contractors and trainees. The FLSA will determine if a job if exempt or nonexempt by using the Professional Test, Administrative Test, Executive Test, and Computer Test. Until the employers finish an exception test, all jobs are considered nonexempt. Typically, anyone who earns a six figure salary is considered exempt.
Salary Basis Test
If an employee has a guaranteed minimum (or they know how much money they are going to make every week), that employee is typically considered to be salaried.
It isn’t uncommon for an employer to pay an employee more than the originally agreed upon salary amount and by doing this, no amount of their base pay is reduced. It is not permitted to lessen an employee’s original salary because of the quality or quantity of work (so long as the employee actually does “some” of the work in the designated period of time).
If there isn’t any work to be performed at that time, a salary’s original salary is not allowed to be reduced. This also applies to a part of the day when the employee must take off. A company is allowed to dock base pay for reasons including personal leave, sick leave, increments in full days, and suspensions. There are both impermissible and permissible reasons for reducing original salary pay. When a reduction is permissible, it does not harm the exempt status of the employee.
It is typically considered that anyone who might be affected by an impermissible reduction in their salary pay is no longer legally and technically receiving a salaried form of payment. In this case, that employee is then nonexempt. Businesses are able to take advantage of several different ways to deal with impermissible reductions of an employee’s salary pay. This salary pay is a requirement for exempt status, but is not applicable to specific job positions including lawyer, public school teacher, and doctor.
The Duties Test
Exemptions laid out by LSA are only for anyone who performs work that would be considered high level. A person’s job description or title are really of use when determining what is and is not high level. For example, calling a secretary an “administrative assistance” does not make that person’s job more high level. Additionally, a CEO is still a CEO even if they have to perform janitorial tasks. There are three types of job duties that qualify for exemption:
Exempt executive job duties
Exempt professional job duties
Exempt administrative job duties
Executive Job Duties that are Exempt
Job responsibilities are considered exempt if the person performing those duties also manages two or more workers (i.e. a manager). Someone who works in a position of managements is automatically performing exempt job duties. A person who has a relatively large amount of power and influence in the company is considered someone who performs exempt job duties. Such duties include assigning tasks to other employees, promoting employees, and handling hiring and firing of staff. If supervising other employees is a routine part of someone’s job and written into their job description, that person is performing job exempt duties. If a person is managing or supervising anyone who is not an official employee, that duty is not considered exempt.
As stated above, a person in a position of management or supervision has to meet the “two employee rule”. This means either two full-time employees or a group off part-time employees who work hours that total up to two full-time employees. For example, two part-time employees make one full-time employee. Simply and vaguely saying someone is a supervisor is not enough; there are certain requirements that must be met for someone to be considered a supervisor. According to the FLSA, there is a list of job responsibilities that would fall under the category of management. These job responsibilities include:
- Interviewing potential job candidates
- Selecting job candidates
- Training new employees
- Deciding the number of hours that an employee works and how much they are paid for those hours
- Tracking number of sales and production
- Appraising productivity
- Dealing with complaints and grievances in the office
- Disciplining employees
- Deciding on work techniques that will be used
- Planning work schedules
- Delegating work to employees
- Decided what kind of equipment will be used at the worksite or what materials are needed
- Creating budget
- Ensuring legal and regulatory compliance in the office
- Creating a safe, secure, and productive environment in the workplace.
Knowing without a doubt if an employee is a manager depends on every unique case and a close evaluation of each case in question. Generally, any employee who seems to have a higher level of responsibility or is noticeably “in charge” of a certain department is usually regarded as a manager. One little trick is to pay attention to who in the workplace is the one to contact the boss (aka the person who owns the company). It is rare to find more than one employee who is “running the show” so to speak at one time, especially at smaller businesses.
For example, if there is a lieutenant and a sergeant in the same unit at the same time, the person with the most authority at that time is the lieutenant. Even if an employee’s official job position is considered “normal” or they are usually just assigned “regular responsibilities”, that employee still might be able to handle executive job responsibilities. An example of this is a fast food manager who works the night shift, managing a team of employees and acting as the boss yet also working some “normal” job duties such as taking orders from customers. If the time comes when someone at the fast food restaurant has to make an executive decision, the manager is there to do this. Lastly, another requirement for executive exemption is any employee who has feedback and involvement in how personnel is handled. This does not necessarily mean that the employee is the ultimate decision maker is these situations, yet they are a part of weighing in on the decision. Example of what “weighing in” might mean include regularly making recommendations regarding personnel and the higher-ups take that their feedback into serious consideration.
Another type of exemption relates to anyone who owns a business (a minimum of 20% of that business) and is an active part of managing the employees and the company. Any time of duty that is performed with a “learned profession” is exempt.
“Learned professions” include but are not limited to doctors, dentists, lawyers, architects, clergy, teachers, registered nurses (LPS not included), accountants (bookkeepers not included), engineers, scientist (technicians not included), actuaries, and pharmacists. Basically, anyone who has expert-level knowledge of subject matter and the proper qualifications would fall under “learned professions”. A job is regarded as professional work if the job duties require the employee’s work be mainly intellectual along with specialized training and education. Jobs that demand excellent judgement are also considered “learned professions”.
Any exempt workers who work in a learned profession position needs education beyond both high school and even college levels. An advanced degree is most likely needed for an employee to be working in the learned professions, although this isn’t always the case. If that employee has reached that level of academia and expertise through some other means, they could still fall under this category. Examples of these employees are people who are creative professionals. Creative professionals include writers, artists, musicians, composers, actors, and sometimes journalists.
If a part of the employee’s job includes originality, raw talent, invention, and imagination, they are performing exempt job duties. Determining whether an employee is exempt or non-exempt is usually quite clear and simple, although in some situations this isn’t applicable. Sometimes it is difficult to determine if someone like a commercial artist or journalist is performing exempt or non-exempt duties.
Administrative Job Duties that are Exempt
One of the most difficult job duties to identify as either exempt or non-exempt is administrative job duties. The FLSA defines the following jobs as exempt administrative duties:
- Office tasks that are conducted solely for business operations, management, and employee relations.
- If the administrative employee must routinely use discretion and good judgement when deciding on matters that affect the business.
- The administrative duties in question are reserved for higher-up employees who are responsible for maintaining business operations at a healthy level.
- The employees’ job description is operational and not production-related. For example, any employee who makes the services or products being sold by the business aren’t administrative employees. An administrative employee is someone who supports the production work being done by other employees. Anyone in administration is a part of the staff and not one of the line employees.
Some examples of administrative duties include the following:
- Accounting and tax
- Marketing and advertising
- Records maintenance
- Payroll and finance
- Labor relations and personnel
- Certain computer-related jobs (like internet administration, network administration, and database administration)
Need additional information related to FLSA exemption? Don’t hesitate to post your legal need on UpCounsel’s marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.