There are a lot of questions around whether an employee is considered exempt or non-exempt. This determination is made by the Fair Labor Standards Act (FLSA). The FLSA determines minimum wage rates, overtime pay, youth employment regulations, and record-keeping requirements for nonexempt workers in the private sector as well as Federal, State, and local governments. Here are a few commonly asked questions about exempt employee status.
What is an exempt employee, and what are they exempt from?
Exempt employees do not receive overtime and have a minimum salary requirement. As the U.S. Department of Labor (DOL) states, “Being paid on a 'salary basis' means an employee regularly receives a predetermined amount of compensation each pay period on a weekly, or less frequent, basis. The predetermined amount cannot be reduced because of variations in the quality or quantity of the employee’s work.” Employers must classify all jobs as either exempt or non-exempt.
How is it determined if an employee is exempt?
Employees must meet both a Duties Test and a Salary Test to be classified as an exempt employee. It is very important to note that, effective July 1, 2018, the Portland metro zone minimum wage increased to $12 per hour. This causes the minimum salary requirements for an exempt employee in the same zone to increase to $480 a week, or $24,960 annually (the previous minimum salary requirement was $455 per week or $23,660 annually, which is still the federal minimum and applies to some areas in Oregon). The Department of Labor has been trying to increase the amount (to a proposed $913 per week), but this attempt was blocked by a federal judge the end of 2016 and has not yet gone into effect. Employers should continue to monitor the updates regarding this issue closely, as changes could soon be coming.
Exempt employees typically perform high-level job duties and fall into one of these three main categories: Executive, Professional, and Administrative. These categories encompass many types of jobs. There are also several examples of positions that may be completely exempt from FLSA coverage, such as truck drivers, switchboard operators, railway workers, employees of movie theatres, and agricultural workers, to name just a few. A useful rule of thumb to help with this determination is this: If a job is covered by a federal labor act outside of the FLSA, the FLSA would not apply. Additional details about the required responsibilities to pass the Duties Test can be found on the DOL webpage.
There are several tools and resources available to help address important concerns related to this topic in the Wage and Hour Division Handy Reference Guide to the Fair Labor Standard Act.
As part of our monthly series, we are offering the following, free one-hour webinar to help our clients and friends better understand the processes around paying workers and what important policies to have in place:
Wage & Hour Done Right
Wednesday, December 19th at 11:00am PST
When registering for the session, please ensure that you enter ‘Bennett/Porter & Associates’ in the registration field that reads “Please provide the name of the company that referred you to this webinar.”