Earning a salary is typically something that is sought after as opposed to an hourly paying job. The thought is that a salaried position comes with higher stability, benefits, and a steadier pay rate.
Unfortunately, salaried employees also relinquish their ability to earn overtime pay. If you are a salaried employee working 50 hours a week, this may actually be working against you. One common misconception among salaried employees is that all salaried employees are exempt from earning overtime pay.
However, this is not completely true. While the vast majority of salaried employees are exempt from overtime pay, there are some exceptions to the exemptions. There are two factors that determine these exceptions.
The first factor in order for a salaried worker to qualify for overtime is the amount they earn per week. This is the more basic and very distinct of the two factors. If you are earning less than $455 per week, you can still qualify for overtime.
If you are a salaried employee earning $455 or more per week, you are not eligible for overtime. The other exemptions is a little less clear and has to do with job duties.
The other factor determining whether or not you are eligible for overtime or not is the duties performed by the employee. This is often considered the “duties test”.
This exemption from overtime relates primarily to employees who perform higher-level work which involves judgement or discretion. These exemptions are often referred to as “white-collar exemptions”. The purpose of this exemption is to restrict traditional white-collar employees for earning overtime without exempting traditional blue-collar jobs.
One key consideration for this exemption is based on the “primary duty” of the particular job. This means that in order for an employee to be exempt due to “white-collar exemptions”, it needs to be principal, main, major, or most important job duty the employee performs.
Luckily the Department of Labor had enough foresight to build into the exemption that the job title holds no basis in this determination. For example, an employer may want to make an employee exempt so they change that employee’s job title to “Managing Supervisor”. However, if there is no managing or supervisory capacity in that employee’s actual job duties, the exemption does not apply.
Typical Exempt Job Duties
Three typical categories of exempt job duties. These exemptions mean that the employee is not entitled to overtime pay. Those three categories are executive, administrative, and professional. Let’s take a look at how these three categories are actually categorized.
Executive job duties are considered exempt and are determined by a three part test. The first is that the employee has a primary duty of managing the enterprise, department, or subdivision of said enterprise. The second part of the executive determination is if the employee regularly directs the work of two or more full-time employees or their equivalent. Finally, to be deemed an executive, the employee must have the authority to hire or fire other employees, or at least influence the employment status decisions.
One of the more challenging classifications to determine is the administrative exemption. In addition to the salary test, a two part test is used to determine if the duties performed by an employee can be deemed administrative.
The employee must satisfy both of the following requirements. First, the employee’s primary duty must be to perform office or nonmanual work that directly relates to the management or business operations of the employer and his or her customers. Secondly, the employee’s primary duties includes discretion and independent judgment in significant situations.
A common misconception is that all employees in a secretarial capacity would be exempt. However, most clerical work, while administrative, is actually not exempt.
The exempt category of “professionals” is often thought to be made up of doctors, lawyers, and teachers. However, this category includes other professions. Two types of professionals can be included in the exempt “professionals” category. Those two are learned professionals, and creative professionals.
A “learned professional” is determined by a three prong test. The employee’s primary duty consists of work requiring advanced knowledge. Advanced knowledge work means that the work is intellectual in nature which includes exercising judgement and discretion. Any routine mental, manual, mechanical, or physical work is not considered advanced knowledge.
The second prong of the test is that the advanced knowledge must be in a field of science or learning. This includes areas such as law, medicine, theology, accounting, actuarial computation, engineering, architecture, teaching, chemical and biological sciences, pharmacy, and other professions that can be distinguished from mechanical or skilled trades.
Finally, the advanced knowledge must have been acquired through extended course or specialized instruction. Basically, this means the employees have obtained advanced knowledge through some combination of experience and intellectual instruction. It does not apply to professionals where the academic training is a standard prerequisite. For example, a carpenter may have been highly trained but does not fall under the professionally exempt.
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