Are Your Employees Eligible for Overtime?

Many employers think they know which employees are entitled to overtime compensation. In my experience, employers are wrong at least half the time. People have a pretty good understanding of the fact that almost all hourly employees in traditional, blue-collar jobs are generally entitled to overtime pay, but the confusion creeps in when management looks at its salaried and white-collar staff.

Under the Fair Labor Standards Act (FLSA) and the wage and hour laws of most states, employees are entitled to be paid at one-and one-half times their base rate of pay for all hours worked in excess of forty in a single work week. The only exceptions are those working in certain high-end (and generally salaried) positions that are described in specific “exemptions” detailed in the laws. Being paid on a salaried basis—being paid the same amount each week, regardless of the number of hours worked—is a prerequisite for most legal overtime exemptions.

The most common overtime exemptions for key executives, administrators, professionals, and sales representatives are described below. Employees who are entitled to overtime pay are described as “non-exempt,” while those who are not entitled to overtime pay are termed “exempt” under the law. Employees paid on an hourly basis, however, are almost always “non-exempt” and entitled to overtime. Eligibility for overtime pay should be established at the time of hire, but reexamined from time to time as an employee’s responsibility and authority change.

Who Is Exempt from Overtime

Since a misclassification error can be the basis for an expensive lawsuit, it is very important that employers correctly identify whether employees are exempt or non exempt. While there are a number of miscellaneous overtime exemptions under federal and state wage and hour laws, there are several key exemptions that apply to certain employees across a majority of industries. Most of these key exemptions require that employee pay not only be salaried, but that it must also meet a minimum. The minimum weekly salary for most exempt positions is $455 per week under federal law. Certain state laws have higher minimum salary requirements—New York and Connecticut have higher minimum requirements in certain  instances. Contact the New York State Department of Labor or the Connecticut Department of Labor for details.

The salary basis and minimum salary tests are merely the initial hurdles that must be overcome in the process of establishing that an employee is not eligible for overtime pay. There also is a specific list of duties—not job titles—associated with each exemption that an employee must perform in order to be classified as exempt. The duties for certain key exemptions are summarized below: