FLSA Training for Supervisors: Part IV

Introduction The Fair Labor Standards Act (FLSA) was passed in 1938. It set standards for child labor, minimum wage and overtime pay. Since the passage of the Equal Pay Act in 1963 as part of the FLSA, the Act also prohibits gender-based wage discrimination. It is essential for all supervisors, in addition to the Human Resources staff, to understand how to comply with FLSA and with state child labor and wage and hour laws. Employers need to train new and retrain current supervisors on these laws to ensure the full and correct compliance. These sample presentations on the FLSA are structured to be given in three sessions and are organized into five parts. The first session (Parts 1-3) covers an introduction to the Act, Child Labor Regulations, and the Equal Pay Act. The second session (Part 4) covers exempt employees. The third session (Part 5) covers non-exempt employees. The sessions are intended for presentation to supervisors and other individuals who manage employees. They are designed to be presented by an individual who has comprehensive knowledge of the FLSA and the employer’s state child labor and wage and hour laws. These sample presentations must be customized to match state laws and the employer’s own policies and practices.

Presentation Contents This training session is the fourth part of five-part series on the FLSA. It is Part 4 - Exempt Employees.

Objectives At the close of this session, you will be able to: State the definition of exempt and non-exempt employees. Understand the exempt requirement of being paid on a salary basis. Determine if an employee is exempt from FLSA minimum wage and overtime pay requirements under the exemptions for: Executive Administrative Professional Computer-Related Outside Sales Highly Compensated Employee

Defining Exempt & Non-Exempt Employees Exempt Employees -- Employees who meet one of the FLSA exemption tests and who are paid on a fixed salary basis and not entitled to overtime. Non-Exempt Employees - Employees who do not meet any one of the Fair Labor Standards Act exemption tests and are paid on an hourly basis and covered by wage and hour laws regarding minimum wage, overtime pay, and hours worked.

Salary Basis Requirement To be paid on a salary basis means that the employee “regularly receives a predetermined amount constituting all or part of the employee’s salary, which amount is not subject to reduction because of variations in the quality or quantity of work performed.”

Salary Basis Requirement (cont’d) In other words, exempt employees must receive their full salary for any week in which they perform any work without regard to the number of days worked or how well the job was performed with the following main exceptions:

Salary Basis Requirement (cont’d) Hourly paid computer professional employees who make at least $27.63 per hour, doctors, lawyers, teachers and outside sales employees are exceptions to an exempt white-collar employee being paid be paid on a “salary basis.

Specific Prohibited Deductions from Salary Partial day absences (employers may pay for these using paid leave accounts). An exception to this prohibition is when the exempt employee is on FMLA leave. Actual pay deductions may be made for partial day FMLA absences. Jury duty and military leave unless the employee performs no work whatsoever during the employer’s standard workweek. When no work is available such as during slow periods or when the business is closed due to weather emergencies.

Questions? Comments?

Exemptions from FLSA Minimum Wage and Overtime Pay Requirements Categories of Exemptions: Executive Administrative Professional Computer-Related Outside Sales Highly Compensated Employee

Executive Exemption Must be paid at least $455 weekly ($23,660 annually) on a salary basis. Primary duty must consist of managing the company or a customarily recognized department of the company. Customarily and regularly direct the work of two or more full-time employees or equivalents. Has the authority to hire or fire other employees or make recommendations that carry weight on significant employment decisions. Examples: Executive officer, controller, vice president, director.

Administrative Exemption Must be paid at least $455 weekly ($23,660 annually) on a salary basis. Primary duty consists of performing office or non-manual work directly related to the management or general business operations of the company. Work includes the exercise of discretion and independent judgment with respect to matters of significance. Examples: manager, supervisor, administrator.

Professional (Learned and Creative) Exemption Learned Professional: Must be paid at least $455 weekly ($23,660 annually) on a salary basis. (Teachers, licensed/certified practitioners of law and medicine, medical interns and residents do not have to be paid on a salary basis) Primary duty consists of the performance of work that requires advanced knowledge (beyond high school) and that is primarily intellectual in character and includes the exercise of discretion and independent judgment.

Professional (Learned and Creative) Exemption (cont’d) The advanced knowledge is in a field of science or learning. The advanced knowledge was acquired by a prolonged course of specialized intellectual instruction (appropriate academic degree or combination of degree and experience). Examples: accountant, nurse, engineer.

Professional (Learned and Creative) Exemption (cont’d) Creative Professional: Must be paid at least $455 weekly ($23,660 annually) on a salary basis. Primary duty consists of the performance of work requiring invention, imagination, originality or talent in a recognized field of artistic or creative endeavor as opposed to routine mental, manual, or physical work. Examples: composer, singer, graphic designer.

Computer-Related Exemption Must be paid at least $455 weekly ($23,660 annually OR at least $27.63 per hour. (Does not have to be paid on a salary basis.) Primary duty consists of: The application of system-analyst techniques and procedures, including consulting with users to determine hardware, software, or systems specifications OR…

Computer-Related Exemption (cont’d) The design, development, documentation, analysis, creation, testing or modification of computer systems or programs, OR… The design, documentation, testing, creation or modification of computer programs related to machine-operating systems, OR… A combination of these duties which requires the same level of skills. Examples: network analyst, developer, software engineer.

Outside Sales Exemption Does NOT have to be paid on a salary basis. Primary duty consists of making sales or obtaining orders for contracts for services or for the use of facilities for which consideration is paid by a client or customer. Customarily and regularly is engaged away from the employer’s place of business. Examples: traveling salespersons, contract negotiators.

Highly Compensated Exemption Highly compensated employees performing executive, professional or administrative duties: Must be paid a total compensation of $100,000 or more annually which includes at least $455 per week paid on a salary basis. The $100,000 annually may consist of commissions, nondiscretionary bonuses and other nondiscretionary compensation.

Highly Compensated Exemption (cont’d) Customarily and regularly performs at least one of the exempt duties or responsibilities of the Executive, Administrative, or Professional Exemption Primary duty consists of performing office, non-manual work Examples: real estate broker, stock broker.

Questions? Comments?

Summary Exempt Employees are employees who meet one of the FLSA exemption tests and who are paid on a fixed salary basis and not entitled to overtime. Non-Exempt Employees are employees who do not meet any one of the Fair Labor Standards Act exemption tests and are paid on an hourly basis and covered by wage and hour laws regarding minimum wage, overtime pay, and hours worked.

Summary (cont’d) Being paid on a salary basis means that the employee “regularly receives a predetermined amount constituting all or part of the employee’s salary, which amount is not subject to reduction because of variations in the quality or quantity of work performed”. Limited exceptions pertain to doctors, lawyers, teachers and outside sales employees.

Summary (cont’d) An employee who meets the salary and job duties criteria may be exempt from FLSA minimum wage and overtime pay requirements under the exemptions for: Executive Administrative Professional Computer-Related Outside Sales Highly Compensated Employee

Questions? Comments?

Course Evaluation Please be sure to complete and leave the evaluation sheet you received with your handouts. Thank you for your attention and interest!