Law Offices of

B. Dahlenburg Bonar, PSC

(859) 431-3333 ∙ 3611 Decoursey, Covington, Kentucky, 41015

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OVERTIME PAY FOR SALARIED EMPLOYEES?

            Two ads for employment run in the Sunday paper.  Each requests candidates with similar education, work experience and skills, and everything else about the jobs is essentially the same.  Company A offers a salary of $12,000.00 per year.  Company B offers $5.77 per hour.  (To save time searching for a calculator, assume this adds up to $12,000.00 per year for a 40-hour work week.)  Both state that an average work week is 50 hours.  Which would you choose?

Compensation wise, this should be an easy choice:  It comes down to $12,000.00 per year for the salaried position verses $12,000.00 per year for the hourly position, plus the overtime compensation of ten hours per week at time and one-half, or $4,500.00 in additional compensation per year.  Or does it?

 THE MYTH

            While it is often assumed that salaried workers are exempt from overtime pay requirements, this is not always the case.  The governing Federal law, the “Fair Labor Standards Act” (FLSA), contains provisions which allow for some salaried workers to receive overtime pay.  State laws also address this issue, and may provide protection beyond that of the FLSA.  The distinctions between exempt and non-exempt employees are found in the type of work the employee performs, not in the title of the position, and the FLSA provides guidelines for determining the exempt/nonexempt status of employees.

 CONSIDER THE DUTIES OF YOUR POSITION

            The FLSA sets forth different criteria for different types of employment; for example, executive, administrative, and professional.  Though these are not exhaustive, they cover the lion’s share of the workforce.  The duties of the position must meet all of the provisions of the particular type of employment to qualify as exempt from overtime provisions.  Following are examples of the types of things that the FLSA considers.

1.  Executive
    a.       primarily manages the enterprise, or a subdivision of the enterprise; and
    b.      supervises two or more other employees; and
    c.       takes substantial part in hiring or firing; and
    d.      regularly exercises discretionary powers; and
    e.       devotes the vast majority of time to the duties described in a-d above.

2.  Administrative
    a.       primary duties must consist of office or non-manual work related to management or general business, or performance of functions in school administration, or directly related to instruction or training; and
    b.    must exercise discretion and independent judgment; and must regularly assist a proprietor or employee in executive or administrative capacity; and
    c.     devotes the vast majority of time to the duties described in a-c above.

3.  Professional
    a.       primary duties must consist of work requiring knowledge gained by a prolonged course of specialized instruction (not including apprenticeship, or other routine training), or work of an artistic nature the result of which depends upon the invention, imagination, or talent of the employee, or teaching or instructing, or skilled computer systems analysis; and
    b.      must exercise discretion and judgment; and
    c.       work must be predominantly intellectual; and
    d.      devotes the vast majority of time to the duties described in a-c above.

WHAT’S LEFT?

These criteria suggest that the positions intended by the FLSA to be exempt from overtime pay provisions fall into the managerial and upper-level administrative positions.  This idea is nothing new, as these positions are usually salaried.  However, consider the positions which do not apply to the above descriptions, and you are left with a huge number of jobs which are nonexempt from overtime pay regulations, regardless of whether they are paid on a salaried, or hourly basis.

WHERE DO YOU FIT IN?

The key to whether a position is or is not “exempt” under FLSA is found in the duties of your job rather than its compensation method or title.  In many instances, employees are entitled to pay at an overtime rate, but do not know it because they are paid on a salary basis.  The same holds true for employers who erroneously believe that they can magically avoid the expense of overtime pay by compensating employees on a salary basis. 

If you believe that you are not being paid all that is due, consult with an attorney to learn more about your rights as an employee.