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Exempt or Non-Exempt? Employee Classification Under FLSA

Florida follows the federal Fair Labor Standards Act (FLSA) to determine if an employee must receive minimum wage and overtime pay. Under FLSA, for covered employers,[1] employees must be afforded these pay protections, unless they are exempt.[2]

An employee is considered exempt if:

  1. The employee is paid a salary (not paid on an hourly basis);
  2. The salary is at least $455 per week;[3] and
  3. The employee performs the duties of an exempt employee.

Salary

In addition to the minimum salary requirement of $455 per week (or $23,660 per year), the salary requirement does not apply to “learned professions” (as described ahead), who are considered exempt even if they are paid hourly. Also, “computer professionals” are exempt if they are paid an hourly rate of at least $27.63. Under certain circumstances, highly paid workers with annual salaries over $100,000 are exempt from FLSA overtime and minimum wage provisions.

Duties

There are three types of exempt duty categories: executive, professional, and administrative.

  1. Exempt executives are primarily managers who regularly supervise employees and who have input in the job status of the employees they supervise (e.g., hiring/firing, job assignments, or promotions.)
  1. Exempt learned professions involve work that is highly intellectual in nature, requires specialized education, and involves the exercise of discretion and judgment. This category includes, but is not limited to, lawyers, doctors, dentists, teachers, architects, clergy, registered burses, accountants, engineers, actuaries, scientists, and pharmacists. It may also include “creative professionals,” such as actors, musicians, composers, writers, cartoonists, and some journalists.
  1. To be exempt, the duties of administrative employees must include office or non-manual work directly related to management or general business operations of the employer or the employer’s customers. In addition, a primary component of their work must involve the exercise of independent judgment and discretion about matters of significance. Examples of exempt administrative employee duties include: human resources employees, payroll and finance, accounting and tax, marketing and advertising (but not direct sales), quality control, public relations, legal and regulatory compliance, and some computer-related jobs.

Other employee occupations listed under FLSA exempt employees from overtime, minimum wage, or both. For example, the following workers are exempt from overtime:

  • Retail or service commissioned employees;
  • Auto, truck, trailer, farm equipment, boat or aircraft salespersons or parts sales clerks;
  • Carrier, vessel or delivery employees paid on approved trip rate plans;
  • Certain broadcasting station announcers, news editors and chief engineers;
  • Domestic service workers residing in their employers’ residences;
  • Employees of movie theatres; and
  • Farmworkers

UntitledThose employed in fishing operations are also exempt from both overtime and minimum wage under the FLSA. Seamen working on American vessels are only exempt from overtime regulations under the FLSA. Those working on international vessels are exempt from both, minimum wage and overtime.

As a general rule, if an occupation falls under another federal labor law, the FLSA will not apply. For example, the Railway Labor Act covers most railroad workers, and the Motor Carriers Act covers many truck drivers.

Employers must be careful with salary deductions

Employers frustrated with employees who are continuously late or absent must be careful when reducing their pay for time not worked. Specifically, if an employer deducts hours not worked from a salaried employee’s pay, the employer may turn the employee into a non-exempt hourly employee, subject to FLSA overtime pay requirements. This does not apply if the employee takes time off under certain conditions, such as the Family Medical Leave Act, to offset jury service fees or military pay, absenteeism other than sick, and disability, among others.

An accepted practice is to “clock in and out,” in order to record the time worked for the purpose of managing tardiness and absenteeism. However, this practice must be applied in a non-discriminatory way. The practice must not disproportionately affect employees in a protected class (e.g., race, color, religion, national origin, sex, age, or protected activity.)

Best Practices

Employers, with the assistance of knowledgeable legal counsel, must carefully review the FLSA exemptions before classifying employees as exempt or non-exempt, or risk liability for employee misclassification.[4] Some exemptions may be subject to interpretation, particularly for duties associated with an exempt duty (e.g., accountant is exempt but bookkeeping is not). Also, occupations not listed under the FLSA may be regulated under other laws.

In addition, employers may find that a main advantage in classifying employees as “exempt” is that they don’t have to track the hours these employees work, no matter how many hours they work. However, there may be advantages to recording time worked. For those employers wishing to record time worked, it is important to consult with legal counsel to ensure that the program is compliant.

Employees who believe they should receive overtime and/or minimum wage should consult an attorney to explore whether their claim is viable and if so, assess potential damages and a recovery strategy.

Whether you are an employer, employee, or independent contractor, the Orlando employment law attorneys of Burruezo & Burruezo can assist you in assessing determining whether an employee is exempt or non-exempt and offer competent legal representation, if necessary. Click here to contact an attorney now.

[1] See FLSA “Enterprise” and “Individual” Coverage blog article for additional information.
[2] There are also other types of FLSA classifications outside the exempt and non-exempt categories, such as volunteers, trainees, interns, independent contractors, and temporary employees. These are addressed separately under the Volunteers, Interns and Other Workers and Independent Contractor or Employee? (Part 1) blog articles.
[3] A proposed rule that has not yet taken effect as of this writing suggests that exempt employees would have to earn at least $970 a week in 2016 ($50,440 a year) to be considered exempt.
[4] See Wage and Hour Claims blog article for information about claims and penalties under state and federal law.

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