"Salaried" Employees Are Not Always "Exempt"

Employers often hold a common misconception that salaried employees absolutely are exempt from overtime wages under the Fair Labor Standards Act (FLSA). This misconception, as well as the resulting consequences from misclassifying a non-exempt salaried employee, can be costly. Salary is merely one aspect of some FLSA exemptions. The employee's duties and not his or her title or method of pay truly determine an employee's exempt or non-exempt status under the FLSA. Paying a non-exempt employee a salary does not determine per se whether the employee is entitled to overtime wages.

To best determine an employee's status you should contact an attorney, but the most common exemptions (and those exemptions in which salary is included in the analysis) include:

• Professional Exemption: Primary duty requires knowledge of an advanced type in a field of science or learning customarily acquired by a prolonged course of specialized instruction OR primary duty is work requiring invention, imagination, originality, or talent in a recognized field of artistic or creative endeavor.
• Administrative Exemption: Primary duty is office or non-manual work (must directly relate to management or general business operations of employer or customers). The employee must also exercise discretion and independent judgment on matters of significance.
• Executive Exemption: Primary duty must be management and the employee in question must regularly direct the work of two full-time employees (or equivalent). The employee in question also must have authority to hire and terminate employees OR recommendations on these issues are given particular weight.

Again these are simply the three most common exemptions (the FLSA includes a lengthy list of exempt employees) and even the particular requirements for these exemptions can be tricky. Assuming the employer properly classified the employee as exempt, an employer still can destroy this exemption by its actions. Some common actions that destroy exempt status are: docking pay for work quality or quantity and using exempt employees to perform non-exempt work.

Remember, your general conceptions regarding salaried versus non-salaried employees might not be entirely accurate. Ensuring you properly classify your employees as exempt or non-exempt will save you money in the long run.

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