Exempt Employee Status Explained

You may have heard in the news recently about political efforts that would change how exempt status works for employees by raising the salary threshold up from $455 a week to somewhere over $900 a week. What does that mean in real terms?

The Fair Labor Standards Act (FLSA), which is the federal wage and hour law establishing rules for things like minimum wage and overtime, says that certain jobs fall outside the scope of its legal umbrella. Quite simply, those whose jobs aren’t covered by the FLSA are “exempt” workers.

The FLSA excludes some industries almost entirely, often because the workers are covered by different laws’ regulations. For example, long-haul truck drivers are usually exempt from the FLSA (which is under the purview of the Department of Labor) because the Motor Carrier Act (which is under the Department of Transportation) has its own set of rules for truck drivers. There are also certain kinds of jobs that are exempt for largely historical reasons. For example, taxicab drivers, movie theater attendants, and amusement park workers are exempt. But, by far, the biggest category of exempt workers are those in what is referred to as the “EAP” categories – Executive, Administrative, or Professional. Here is where the news about the salary threshold increase becomes important.

In order for an employer to properly claim an employee to be “EAP” exempt, the company must (in addition to other requirements regarding the duties the employee performs) pay the employee on a salary basis (i.e. the same amount paycheck to paycheck) and that salary amount must be above a certain minimum amount – currently, that’s $455 a week ($23,600 a year).

So, for example, if you are a “manager” but are paid a salary of $400 a week, you are not exempt from the FLSA (even if your boss tries to tell you that you are). If you work more than 40 hours a week, you have to be paid overtime. What this news means is that in the future, employees who are currently exempt “managers,” but are paid, say, $800 a week, would no longer be exempt and would have to be paid overtime (assuming that minimum threshold is over $900 – the exact rate hasn’t been firmly established yet). That is really good news for lots of workers!

Similarly, if you are a “manager,” but one week you are paid $500, the next week you are paid $650, and the next week you get $600, you very well may not be exempt after all either because you’re not really paid on a “salary basis.” (There are some circumstances when pay fluctuations can be valid, but not usually.)

If the employer doesn’t meet BOTH of those requirements – salary basis and salary of over the minimum amount – then they can’t claim the exemption. But that’s not the end of the story.

Even if the employer does pay on a salary basis, and more than the minimum amount per week, the job duties themselves must be of a character that qualify for the exemption as well. While many jobs fall pretty clearly into one or more of these categories, oftentimes employers will try to squeeze a square peg into a round hole when it just plain doesn’t fit. Below is an overview of the requirements in regards to duties that an employer must be able to prove in order to claim one of the EAP exemptions.

Executive

Though each position must be considered on a case-by-case basis, a person who performs the duties of a boss or manager can be said to be performing executive duties. If the employee supervises two or more other employees, if the focus of their job is management, or if they have a considerable say in the job status of other employees, such as hiring and firing decisions, then that employee performs executive duties and is probably exempt from the FLSA.

Administrative

As the title of this category states, this exemption refers to employees whose main duties revolve around administrative support of the company they work for without actually aiding in the production of the company’s product or services. To be exempt as administrative personnel, the employee must be considered “high-level” and perform duties that are far beyond simple clerical work. This generally includes HR or PR staff. If an employee performs office/non-manual duties that directly relate to the management or operations of the business and also involves independent decision making in matters of significance, then they will be exempt from the FLSA as an administrative employee.

Professional

In general, this exemption refers to intellectual jobs that would require a college (or advanced) degree or specialized education, and require employees to exercise judgement within the execution of their job duties. Lawyers and doctors are some examples. Professional exemptions also include creative positions that provide unique services to a company that require a degree of imagination.

The lines of whether a job falls under exempt status from the Fair Labor Standards Act can be very blurry. It’s important that you consult an experienced professional worker’s rights law firm like AndersonDodson to learn about your specific rights at your job or if you believe your employer is not adhering to the law. And don’t forget, even if your job is exempt, there is plenty of other legislation governing workers’ rights outside the FLSA so let us help you learn your rights and protect yourself. Give us a call for a free evaluation today.

Written by AndersonDodson

AndersonDodson

AndersonDodson, P.C. is a law firm dedicated to holding employers accountable for paying their employees correctly. We are aggressive and tenacious when we need to be, if that’s what it takes to get the job done. Sometimes the playground bully needs to be brought down a notch, and we are plenty equipped for a fight if it becomes necessary. But we also don’t go looking for a fight. Our mission is to get our clients paid what the law says they deserve, not to stir up trouble where none is needed. Trouble is distracting from life, and living life should always come first.