The Fair Labor Standards Act: Executive, Administrative and Professional Exemptions Brendon R. Beer, Esq. Abbott, Thomson, Mauldin, Parker & Beer, PLC

Fair Labor Standards Act Federal Minimum Wage: – $7.25/hour beginning July 24, 2009 Overtime: 1 ½ times the regular rate of pay for all hours over 40 hours in a work week

“White Collar” Exemptions Section 13(a)(1) of the FLSA provides an exemption from both minimum wage and overtime pay for employees who are employed in a bona fide: – Executive; – Administrative; – Professional; or – Outside Sales capacity. Certain computer employees may be exempt professionals under Section 13(a)(1) or exempt under Section 13(a)(17) of the FLSA.

Three Tests for Exemption Salary Level Salary Basis Job Duties

Minimum Salary Level: $455 For most employees, the minimum salary level required for exemption is $455 per week Must be paid “free and clear” The $455 per week may be paid in equivalent amounts for periods longer than one week: – Biweekly:$910 – Semimonthly:$ – Monthly:$1,971.66

Highly Compensated Test Total annual compensation of at least $100,000 At least $455 per week paid on a salary or fee basis Perform office or non-manual work Customarily and regularly perform any one or more of the exempt duties identified in the standard tests for the executive, administrative or professional exemptions – A frequency that must be greater than occasional but which, of course, may be less than constant – Includes work normally and recurrently performed every workweek – Does not include isolated or one-time tasks

Office or Non-manual Work The Highly Compensated Test is not available for: – Non-management production line workers – Non-management employees in maintenance, construction and similar occupations such as carpenters, electricians, mechanics, plumbers, iron workers, craftsmen, operating engineers, longshoremen, construction workers and laborers – Other employees who perform work involving repetitive operations with their hands, physical skill and energy

Salary Basis Regularly receives a predetermined amount of compensation each pay period (on a weekly or less frequent basis) The compensation cannot be reduced because of variations in the quality or quantity of the work performed Must be paid the full salary for any week in which the employee performs any work Need not be paid for any workweek when no work is performed An employee is not paid on a salary basis if deductions from the predetermined salary are made for absences occasioned by the employer or by the operating requirements of the businesses If the employee is ready, willing and able to work, deductions may not be made for time when work in not available

NOTE: No Salary Requirements The salary level and salary basis tests do not apply to: – Outside Sales Employees – Doctors – Lawyers – Teachers – Certain computer-related occupations paid at least $27.63 per hour

Executive Duties Primary duty is management of the enterprise or of a customarily recognized department or subdivision; Customarily and regularly directs the work of two or more other employees; and Authority to hire or fire other employees or whose suggestions and recommendations as to hiring, firing, advancement, promotion or other change of status of other employees are given particular weight.

Administrative Duties Whose primary duty is the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers; and Whose primary duty includes the exercise of discretion and independent judgment with respect to matters of significance.

Learned Professional Duties The employee’s primary duty must be the performance of work requiring advanced knowledge In a field of science or learning Customarily acquired by a prolonged course of specialized intellectual instruction

Exempt Learned Professions Lawyers Teachers Doctors Registered Nurses (not LPN; and only if paid on “salary basis”) Accountants (not accounting clerks or bookkeepers) Pharmacists Engineers Actuaries

Creative Professional Duties The employee’s primary duty must be the performance of work requiring invention, imagination, originality or talent in a recognized field of artistic or creative endeavor

Exempt Creative Professions Music – Musicians, composers, conductors, soloists Writing – Essayists, novelists, short-story writers, play writers – Screen play writers who choose their own subjects – Responsible writing positions in advertising agencies Acting Graphic Arts – Painters, photographers, cartoonists

President Obama’s Memorandum Dated March 13, 2014 – “Regulations regarding exemptions from the FLSA's overtime requirement, particularly for executive, administrative, and professional employees (often referred to as "white collar" exemptions) have not kept up with our modern economy. Because these regulations are outdated, millions of Americans lack the protections of overtime and even the right to the minimum wage.” – Directs the Secretary of Labor to propose revisions to modernize and streamline the existing overtime regulations.

Key New Regulation July 6, 2015 Increase in Salary Level – Minimum salary threshold level for a white-collar exemption is currently $455 per week or $23,660 per year. – The minimum salary threshold for white-collar exemptions would increase to the 40 th percentile of weekly earnings for full-time salaried workers. Currently, that level is $970 per week or $50,440 per year. – Minimum salary threshold level would adjust for inflation each year. – Total annual compensation required to qualify for the highly compensated exemption to be equal to the 90th percentile of earnings for full-time salaried employees (currently $122,148 per year).

Are More Changes Coming? Potential changes to Duties Test (“primary duty”) – DOL still considering a requirement that an exempt employee be primarily engaged in exempt duties at least 50 percent of their work time. – Accepting comments on this issue now. This requirement already exists in California.

Enforcement Focus U.S. Department of Labor’s budget up nearly 25% 300 plus new full-time employees Focus on “targeted” audits – Retail, Leisure, Hospitality, Health Care, and Education Nearly 50% of audits in 2015 were targeted rather than complaint based. – Violations in over 75% of “targeted” audits

Penalties If employees establish that they were not paid as required by the FLSA, they can recover unpaid wages going back two years. If the employer's violation is "willful," the back-pay period is 3 years and the recovery is doubled as "liquidated damages.“ Additionally, you will be paying my attorneys fees, will which be excessively high.