Understanding Why an Employee Qualifies as Exempt Under FLSA

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The Fair Labor Standards Act (FLSA) defines a number of employees or other requirements that can be used to consider an employee as exempt from the regulations of this federal law. Among other things, this law is concerned with regulating overtime pay for non-exempt employees. Exempt employees, however, are not covered by this law.

What this means is that employers are not obligated to pay exempt employees overtime pay, provided they meet the requirements to be considered exempt. Unfortunately, it isn’t always as simple as it seems to classify an employee as exempt or non-exempt. This is a complex matter with far-reaching implications for your company if it is not determined properly.

The Requirements for FLSA Exempt Employees

There are some positions that are automatically defined as exempt, such as agricultural worker, but for many others, employers are required to use a series of tests. These tests are used to determine if the employee meets the three requirements for exemption:

  • Makes less than $23,600 per year or $455 per week
  • Receives pay on a salary basis
  • Performs exempt job duties

Exempt job duties fall into three categories: executive, professional, and administrative. Executive duties include managing more than 2 employees, making employment status decisions regarding other employees, and primarily manages a business. Professional duties are those performed by someone with an advanced education, who uses their own judgment and guidance to make decisions. Administrative duties include non-manual labor that helps run the operations side of a business.

Examples of These Tests in Action

You may be wondering just what these tests mean for you. If you are an employee, you can conduct these tests on yourself to ensure that you are properly classified. If you do not pass the tests to be considered an exempt employee, while your employer classifies you as such, you may not be paid what you deserve.

Here are some examples to help you better understand how to apply these tests.

Example 1: Graphic Designer

Susan is a graphic designer who is employed full time by her company. She receives a salary of $740 each week, which means she has an annual salary of $38, 480. In her work, Susan creates logos, marketing materials, and performs other design tasks. She receives guidance from her clients, but ultimately is able to use her advanced education and discretion to create her projects.

When we apply the three tests to Susan, we see:

  • Susan is paid on a salary basis.
  • Susan makes more than $23,600 annually.
  • Susan performs professional duties in her position.

We can safely presume that Susan is considered an FLSA exempt employee, and does not receive overtime pay.

Example 2: Executive Assistant

Jordan is an executive assistant, and he helps manage the daily tasks and business of his company’s Chief Financial Officer. Jordan is paid on a salary basis, and makes $27,000 a year. His tasks include managing phone calls, scheduling appointments, and running errands, but he does not make decisions or exercise judgment on matters of any significance.

Jordan’s results for the three tests are:

  • Jordan is paid on a salary basis.
  • Jordan is paid more than $23,600 annually
  • Jordan does not exercise judgment in a significant way and does not meet the requirements for administrative duties.

Looking at Jordan’s results, we can see that he does not meet all 3 requirements, and is not FLSA exempt.

Example 3: Restaurant Manager

Paige clocks in at the start of her shift as a restaurant manager. She is paid $20 an hour for working full-time at her restaurant. She not only handles the hiring, firing, and assignments of her 25-person crew, but she also helps out in the kitchen with food prep, plating food, and even cleaning.

When we test Paige’s job, we learn:

  • Paige is not paid a salary.
  • Paige makes more than $23,600 per year.
  • Paige manages 25 people and performed executive duties.

Because Paige is paid on an hourly basis, she is not FLSA exempt. Paige’s employer must pay her overtime when necessary.

At Donati Law, PLLC, we are dedicated to helping employees fight for their rights. We have the knowledge and experience to investigate your FLSA exemption status and determine if you have been misclassified. Schedule a consultation with our Memphis employment law attorneys to learn more.

Contact our firm to learn more. We can be reached at (901) 209-5500.

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