Are all employees entitled to minimum wage and overtime?

No, but plenty are. The Fair Labor Standards Act (“FLSA”) establishes minimum wage, overtime pay, recordkeeping, and youth employment standards affecting employees. State laws govern other related employment issues that the FLSA doesn’t govern such as timing of payment of wages.

Who is entitled to overtime pay? What about minimum wage?

Non-exempt employees.

What does exempt and non-exempt mean?

Exempt means an employee is exempt from (not subject to) the minimum wage and overtime requirements of the FLSA.

Non-exempt means an employee is required to be paid minimum wage and receive overtime pay under the FLSA.

Who is exempt?

First of all, there is a common misconception that salary means exempt. Not true! Rather, an analysis must be done to determine whether an individual is exempt from overtime.

To qualify for an exemption from overtime, employees generally must be paid $455 (this changes to $913 per week on Dec. 1, 2016) per week or more on a salary basis AND pass a duties test. The duties test requires that the primary duties of an employee fall into one of six categories of exemption:

• Executive: primary duty involves management of department; regularly directs the work of 2+ full time employees; authority to hire and fire.
• Administrative: primary duty involves performance of office or non-manual work directly related to the management of business operations or customers; job requires exercise of discretion and independent judgment.
• Learned Professional: primary duty involves performance of work requiring advanced knowledge that is primarily intellectual in character that requires consistent exercise of discretion and judgment; advanced knowledge must be in field of science or learning; advance knowledge customarily acquired by prolonged course of specialized instruction.
• Computer-related: primary duty must involve application of systems analysis to techniques and procedures; design, development, analysis, creation, testing or modification of computer systems or programs; or design, documentation, testing, creation or modification of computer programs relating to operating systems.
• Outside Sales: primary duty involves making sales or obtaining orders or contracts for services or for the use of facilities for which a consideration will be paid by client or customer; employee must be customarily engaged away from the employer’s place of business.
• Highly Compensated Employees (total annual compensation > $100,000 ($134,004 on Dec. 1, 2016) or more: primary duty includes performing office or non-manual work; and customarily performs at least one of the exempt duties or responsibilities of an exempt executive, administrative or professional employee.

The FLSA provides a useful tool called the FLSA Overtime Security Advisor for employers to use to determine whether or not an employee is exempt from overtime laws. The Overtime Security Advisor can be accessed here: http://www.dol.gov/

If an employee does not fall into one of the categories of exemption, that employee is non-exempt. Employees that are non-exempt must be paid one-and-one-half times their regular rate of pay for each hour over 40 in one work week, and all must be paid at least minimum wage for all hours worked.

Recently, the FLSA made some pretty large changes to existing labor laws that are to begin on December 1, 2016. More information about the changes will be addressed in KEW’s next blog post.

Contact employment Attorneys Jessica M. Kramer at kramer@kewlaw.com or Leslie Elkins at elkins@kewlaw.com for an in depth analysis of how to structure your business to comply with the mandates of the FLSA.