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Tuesday, October 30, 2018

Quick FAQs: Overtime Laws and Exempt Employees

Most employees must be paid overtime if they work over 40 hours per work week based on a federal law called the Fair Labor Standards Act (FLSA). Most states, including New Jersey, Pennsylvania, and New York have their own version of the FLSA, often providing benefits greater than federal law.

Under the FLSA, overtime should be no less than one and one-half times the employee’s regular rate of pay. However, some employees are exempt from the Fair Labor Standards Act. These employees often do not receive overtime pay, but an employer can choose to pay for hours worked over a threshold amount if they so desire.

What is a “Work Week”?

A work week is a fixed period of 168 hours, which is seven consecutive 24-hour periods. The week is classified in this way so that employers can choose when they would like to start their work week—there is no requirement that it begins on a Monday or a Sunday, for example.

Different classifications of employees may also have different time periods for their work weeks. As long as the work weeks remain consistent, then an employer should have no trouble determining when overtime pay is appropriate.

Are All Employees Covered by the FLSA?

Not every employee will qualify for overtime under the FLSA. Specific jobs may be excluded entirely while others are only excluded if certain conditions apply.

For example, most movie theater workers and agricultural workers are exempt from the FLSA. That means that employers are not required to pay these workers overtime if they work over 40 hours per work week.

Does the FLSA Cover All Employers?

The FLSA only applies to employers that gross more than $500,000 in annual sales or who are engaged in interstate commerce. While this definition may seem limited, it is actually comprehensive, particularly considering the fact that many businesses sell goods and services online to customers or clients across the country. Only very small, local employers can avoid the restrictions imposed by the FLSA. However, these small, local employers may be subject to their state's wage and overtime laws.

Who Are Exempt Employees?

While the FLSA covers most employers and employees, some employees are specifically exempt from the FLSA’s requirements if they meet certain conditions. In most situations, whether an employee is exempt will depend on three major criteria:

  1. How much an employee is paid;
  2. How the employee is paid; and
  3. What kind of work the employee does.

Generally, exempt employees must be paid no less than $23,600 per year and be paid on a salary basis. This exemption applies if the employee makes a “guaranteed minimum,” but also earns additional income, such as through commissions or bonuses. Lastly, the employee must also perform specific exempt functions, including:

  • Executive
  • Administrative
  • Professional
  • Computer
  • Outside sales functions

Each of these categories requires that the employee carry out particular duties or obligations to be considered exempt. These job duties are set out in various federal statutes and regulations. In addition, a state may have more comprehensive definition of an exempt employee.

The penalties for misclassifying an employee as exempt when the employee's job duties are really non-exempt can be significant. In addition to requiring the employee to receive back pay, Department of Labor regulations can result in penalties and interest charges imposed on the employer.

It is a good idea to consult with a business attorney if you are thinking about classifying an employee as exempt as a means to eliminate the requirement to pay overtime hours. The Law Office of Randall P. Brett can assist you in determining the proper classification of your employees.


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