Because I’m here to remind you (and tell them) that “salary exempt” generally means nothing unless the employee performs certain duties.
But let’s start with the basics.
The Fair Labor Standards Act requires most companies to pay their U.S. employees at least the federal minimum wage for all hours worked and overtime pay at not less than time and one-half the regular rate of pay for all hours worked over 40 hours in a workweek.
There are exceptions. Well, technically, they are exemptions.
Employees who are bona fide executive, administrative, professional, outside sales, and certain computer employees are exempt from the FLSA’s minimum wage and overtime requirements. Yes, to qualify for exemption, employees generally must be paid on a salary basis. As of July 1, the minimum salary threshold for exempt employees is $844 per week ($43,888 per year).
However, there’s more just an exemption than salary. There are duties tests too. Take the FLSA’s administrative exemption, for example. Beyond a salary of at least $844/week, the employee must primarily perform office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers. Additionally, the employee’s primary duty must include the exercise of discretion and independent judgment concerning matters of significance.
Consider this recent federal court opinion involving the office manager at a car dealership. That title sounds relatively important. But, the plaintiff and defendants disagreed on how they characterized the plaintiff’s duties. Indeed, emphasizing the plaintiff’s “manager” role, the defendants argued that the plaintiff’s check-signing authority was compelling evidence that she possessed some decision-making authority over certain financial aspects of the job. Conceding that her name did appear on some checks, the plaintiff presented evidence that her supervisors approved or scrutinized any check she wrote. According to the plaintiff, “she simply effectuated the desires of her superiors with respect to the Dealership’s purchasing and inventory of vehicles.” In other words, her ability to write checks was entirely clerical and reflected no independent judgment.
The rift over the quantity and quality of the plaintiff’s independent decision-making precluded the employer from obtaining summary judgment, even though it paid her about $7,000 in salary per month. Ultimately, a jury will have to sort this out.
But cases like these remind us that money is but one element of whether an employee is exempt from the FLSA’s overtime rules. Since the burden is on the employer to establish an exemption—not an employee to disprove one—it’s essential for employers to understand and appreciate that duties tests must be satisfied, in addition to the salary level requirement, to avoid paying overtime.