EXEMPTIONS FOR WHITE COLLAR EMPLOYEES UNDER THE FLSA

The Fair Labor Standards Act (“FLSA”) requires that covered employees be paid at least the federal minimum wage for all hours worked and overtime pay at one and one-half times the regular rate of pay for all hours worked over 40 hours in a workweek.  The improper use of exemptions has led to significant wage and hour litigation.

Section 13(a)(1) of the FLSA provides an exemption from the minimum wage and overtime pay requirements for individuals employed in bona fide executive, administrative, and professional positions, as well as in outside sales roles.  Section 13(a)(1) and Section 13(a)(17) also exempt certain computer employees from the minimum wage and overtime pay requirements.  Generally, to qualify for these exemptions, employees must meet certain tests regarding their job duties and be paid on a salary basis of not less than $455 per week. 

In order for an exemption to apply, an employee’s specific job duties and salary must meet all the requirements established by the Department of Labor.  Many employers have classified employees as exempt without meeting these requirements.  As a corollary, these employers then fail to meet their legal obligations to pay minimum wage and overtime, withhold taxes, make contributions to Social Security and Medicare, and provide coverage under available employee benefit plans to workers.  The IRS and State of Colorado have active initiatives to recover lost tax revenue arising from the misclassification of a worker as exempt. 

The requirements for the most commonly asserted exemptions are identified below:

Executive Exemption

To qualify for the executive exemption, all of the following requirements must be met:

  The employee must be compensated on a salary basis at a rate not less than $455 per week;

 The employee’s primary duty must be managing the enterprise, or managing a customarily recognized department or subdivision of the enterprise;

 The employee must customarily and regularly direct the work of at least two or more other full-time employees or their equivalent; and

 The employee must have the authority to hire or fire other employees, or the employee’s suggestions and recommendations as to the hiring, firing, advancement, promotion or any other change of status of other employees must be given particular weight.

The Department of Labor has published a fact sheet relating to the Executive Exemption, which may be accessed through the following link.  Executive Exemption Fact Sheet

Administrative Exemption

To qualify for the administrative exemption, all of the following requirements must be met:

 The employee must be compensated on a salary or fee basis (as defined in the regulations) at a rate not less than $455 per week;

 The employee’s primary duty must be the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers; and

 The employee’s primary duty includes the exercise of discretion and independent judgment with respect to matters of significance.

The Department of Labor has published a fact sheet relating to the Administrative Exemptoin, which may be accessed through the following link.  Administrative Exemption Fact Sheet

Professional Exemption

To qualify for the professional employee exemption, all of the following tests must be met:

 The employee must be compensated on a salary or fee basis (as defined in the regulations) at a rate not less than $455 per week;

 The employee’s primary duty must be the performance of work requiring advanced knowledge, defined as work which is predominantly intellectual in character and which includes work requiring the consistent exercise of discretion and independent judgment;

 The advanced knowledge must be in a field of science or learning; and

• The advanced knowledge must be customarily acquired by a prolonged course of specialized intellectual instruction.

The Department of Labor has published a fact sheet relating to the Professional Exemption, which may be accessed through the following link.  Professional Exemption Fact Sheet

Creative Professional Exemption

To qualify for the creative professional employee exemption, all of the following tests must be met:

 The employee must be compensated on a salary or fee basis (as defined in the regulations) at a rate not less than $455 per week;

 The employee’s primary duty must be the performance of work requiring invention, imagination, originality or talent in a recognized field of artistic or creative endeavor.

Computer Employee Exemption

To qualify for the computer employee exemption, the following tests must be met:

 The employee must be compensated either on a salary or fee basis (as defined in the regulations) at a rate not less than $455 per week or, if compensated on an hourly basis, at a rate not less than $27.63 an hour;

 The employee must be employed as a computer systems analyst, computer programmer, software engineer or other similarly skilled worker in the computer field performing the duties described below;

 The employee’s primary duty must consist of:

     1) The application of systems analysis techniques and procedures, including consulting with users, to determine hardware, software or system functional specifications;

     2) The design, development, documentation, analysis, creation, testing or modification of computer systems or programs, including prototypes, based on and related to user or system design specifications;

     3) The design, documentation, testing, creation or modification of computer programs related to machine operating systems; or

     4) A combination of the aforementioned duties, the performance of which requires the same level of skills.

The Department of Labor has published a fact sheet relating to the computer employee exemption, which may be accessed through the following link.  Computer Employee Exemption Fact Sheet

Outside Sales Exemption

To qualify for the outside sales employee exemption, all of the following tests must be met:

 The employee’s primary duty must be making sales (as defined in the FLSA), or obtaining orders or contracts for services or for the use of facilities for which a consideration will be paid by the client or customer; and

 The employee must be customarily and regularly engaged away from the employer’s place or places of business.

The Department of Labor has published a fact sheet for the outside sales exemption, which may be accessed through the following link.  Outside Sales Exemption Fact Sheeet

“Salary” Requirement for White-Collar Exemption

To qualify for the white-collar exemptions, employees must be paid on a salary basis. Employees are paid on a salary basis if they receive a specified amount of compensation each pay period that does not change due to variations in their work.  Salaried employees generally must receive their full salary for any week in which they perform work, without regard to the number of days or hours worked. However, employers are not required to pay salaried employees for workweeks in which they perform no work.

White-Collar v. Blue-Collar Jobs

The FLSA exemptions generally apply only to employees in white-collar professions. The FLSA regulations further clarify this requirement by establishing two groups of employees who always qualify for minimum wage and overtime protections, regardless of salary:

 

  manual laborers, defined as non-management employees in production, maintenance, construction, and similar occupations; and

 

  police, fire fighters, paramedics, and other first responders.  In addition, licensed practical nurses and similar health care employees do not qualify as exempt professionals. However, registered nurses or certified medical technologists who meet the salary test and must complete a prescribed course of advanced studies to receive registration or certification can qualify as exempt professionals.

 

Compliance Assistant Available From Baird Quinn's Labor and Employment Attorneys

Baird Quinn’s Colorado labor and employment lawyers represent businesses and workers in addressing FLSA classification issues.  They represent businesses in audits by governmental agencies designed to determine whether workers have been misclassified as exempt.  Baird Quinn’s Colorado FLSA lawyers also represent workers in recovering lost wages, overtime and benefits due to a misclassification issues.

If you need legal representation in dealing with a misclassification issue, or any other wage and hour issue, please contact Baird Quinn’s labor and employment attorneys for assistance.  You may learn more about our Denver FLSA lawyers at the following link.  Contact Us

 


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