|Taking Care of Business: Understanding Overtime Rules for Salaried Employees
Making sure your employees are properly taken care of is one of your most important responsibilities. In today’s workplace, that includes making sure they are provided with fair and competitive wages, quality health insurance, and retirement plan options. Furthermore, to ensure your employees find continued satisfaction in their positions, it is beneficial to offer them extra perks, such health club memberships, ample vacation time, and flexible scheduling, just to name a few. It is easy to get caught up in details such as these and think you have everything covered. However, the most important topic to understand and take seriously is labor laws.
In 2016 changes made to the Fair Labor Standards Act (FLSA) shook up the employers’ world. The revisions that were made to the FLSA defined new parameters for overtime rules, forcing many businesses to make changes to their existing payroll. The FLSA is not to be taken lightly. As an employer, you should know the law, to whom it applies, and the penalties that will come your way if you don’t abide by it.
What is overtime?
Let’s get started with answering the question, “What is overtime?” Overtime is defined by the United States Department of Labor (DOL) as payment for the amount of time over 40 hours worked during a week. Overtime is 1.5x regular hourly pay. Let's break that down. If you are paying an employee $20.00 an hour for 40 hours per week, once they have worked more than 40 hours you must pay them $30.00 an hour.
It is NOT defined by the DOL that overtime must be paid for holidays or weekends. Also, as an employer, you do not have to pay overtime to every employee that works more than 40 hours.
Understanding Which Employees are Eligible for Overtime
Are salaried employees eligible for overtime? In short, the answer is yes, but there is more to it. In order to understand which of your salaried employees are eligible for overtime, you must first know the difference between an exempt and non-exempt employee.
To put it simply, paid overtime is not required for exempt employees. To consider an employee exempt, you must pay them a minimum of $913/ week or $47,476.00/year, and their job duties must fall in an administrative, executive or professional category as defined by the Department of Labor.
Let's break down these three categories for a better understanding. To fall under the administrative category, the individual’s job description must not be primarily manual labor. However, it must be directly related to managerial duties and it must exercise judgment regarding business operations. For a job to be considered in the executive category, the employee must be paid on a salary basis and have supervision over two or more employees who must also possess hiring and firing rights. Finally, an employee in the professional category must perform primarily intellectual work and have advanced knowledge. Some examples of exempt employees are lawyers, doctors, IT specialists, professors, educators, and managers.
Now that you have a clear understanding of what an exempt employee is, understanding a non-exempt employee is much easier. You are required to pay overtime for non-exempt employees. To consider one of your employees non-exempt, their job cannot fall under the administrative, executive, or professional categories listed above. Similarly, their hourly wage or annual salary must be less than $913.00/week or $47,476.00 per year. In general, non-exempt employees perform more manual tasks, have no managerial responsibilities, and do not require an advanced degree. Some examples of non-exempt employees are laborers, secretaries, executive assistants, clerks, and sales employees.
Are there any exceptions?
When it comes to the FLSA, there are some exceptions to overtime that fall outside of the exempt/non-exempt boundaries. If you employ any of the following types of workers, you are not required to follow the overtime rules set forth by the FLSA: seasonal workers, apprentices, small newspapers, newspa
per delivery workers, domestic employees, and independent contractors. Additionally, farm and airline workers are often covered and governed by their own set of rules.
What are the penalties for not following the FLSA?
As an employer, it is imperative for you to comply with the rules set forth by the FLSA. If there are gray areas regarding certain positions offered within your company, it is best to consult a professional to make sure that you are abiding by the law and that you avoid future penalties.
According to the DOL, if you are caught violating rules related to overtime as established by the FLSA, you can be fined up to $1,100.00 for each instance of a willful violation. Additionally, you can be fined up to $11,000.00 for each employee that is a victim of this violation. Therefore, if you violate the law for three employees, you could be fined up to $36,300.00, and that is just for the first violation.
You want to take care of your employees, and that starts with understanding the laws regarding their rights as workers. Laws such as the FLSA are in place to protect you as theemployer, just as much as they protect the employee. Understanding and following them will serve you and your business well and help you to thrive.