Overtime Pay: Exempt vs. Non-Exempt
Who is Exempt from Overtime Under the FLSA and Massachusetts Overtime Law?Any employee who is not exempt must be paid overtime pay under federal and Massachusetts overtime laws. The first rule is that to be exempt they must be salaried, but there are times when a company has to pay even salaried employees overtime. Whether or not an employee is paid a salary, they can only be considered exempt from overtime pay if their job duties fit an overtime exemption. These exemptions are found in the federal Fair Labor Standards Act ("FLSA"), in Massachusetts state law, and in the regulations of the federal Department of Labor.
Though some exemptions are very specific, there can be a lot of gray area in determining whether an employee should be classified as exempt. The three general categories of exempt duties are the professional exemption, the executive exemption, and the administrative exemption. These are described in more detail below. Exemption from the overtime rules based on job duties requires that the exempt duty be your "primary duty." This can get tricky when an employee does more than one kind of thing in their job. "Primary duty" does not have a mathematical test. Certainly if more than half of what the employee does are non-exempt duties, they are most likely non-exempt and should be paid overtime. If 75% or more of what they do falls within one of the above exemptions, they are most likely exempt and not entitled to overtime. Many of the cases where overtime status is challenged fall somewhere in the middle. |
Need Help With an Overtime Pay Problem?OR
|
Exempt Definition: Bona Fide Professional Employee
To be considered FLSA exempt as a bona fide professional employee, the following must be true:
The fact that an employee has an advanced degree does not necessarily mean they are exempt. A person with a law degree who is not practicing law may not meet the exemption requirement, for example. The important test is what you are actually doing in your job.
- The employee’s primary duty must be the performance of work requiring advanced knowledge. This is defined as work which is predominantly intellectual in character and which includes work requiring the consistent exercise of discretion and judgment.
- The advanced knowledge must be in a field of science or learning.
- The advanced knowledge must be usually acquired by a prolonged course of specialized intellectual instruction.
The fact that an employee has an advanced degree does not necessarily mean they are exempt. A person with a law degree who is not practicing law may not meet the exemption requirement, for example. The important test is what you are actually doing in your job.
Exempt Definition: Bona Fide Executive Employee
To be considered FLSA exempt as a bona fide executive employee, the following must be true:
There have been successful class action suits against major retailers arguing that assistant store managers are not exempt. These "managers" in reality spent most of their time doing what non-exempt employees do in the stores.
- The employee’s primary duty must be managing the enterprise or a recognized department or subdivision.
- The employee must customarily and regularly direct the work of at least two or more other full-time employees.
- The employee must have the authority to hire or fire other employees. If they do not have direct hiring authority they may still be exempt if their recommendations are given particular weight in the hiring or firing process.
There have been successful class action suits against major retailers arguing that assistant store managers are not exempt. These "managers" in reality spent most of their time doing what non-exempt employees do in the stores.
Exempt Definition: Bona Fide Administrative Employee
To be considered FLSA exempt as a bona fide administrative employee, the following must be true:
Examples of exempt administrative employees include higher level staff in human resources, payroll or finance, accounting, marketing and public relations, and compliance.
Exempt employees must also exercise independent judgment on “matters of significance." What this means can be very fact-specific. Deciding when to put a call through to someone is likely not a "matter of significance" for overtime law. Deciding what marketing message to use probably is. Disputes tend to arise where the task is significant but the employee has to get levels of approval.
- 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.
- The employee’s primary duty includes the exercise of discretion and independent judgment with respect to matters of significance.
Examples of exempt administrative employees include higher level staff in human resources, payroll or finance, accounting, marketing and public relations, and compliance.
Exempt employees must also exercise independent judgment on “matters of significance." What this means can be very fact-specific. Deciding when to put a call through to someone is likely not a "matter of significance" for overtime law. Deciding what marketing message to use probably is. Disputes tend to arise where the task is significant but the employee has to get levels of approval.
Overtime Rules for Highly Compensated Employees
If an employee is considered a highly compensated employee, he or she needs to meet only one of the above duties to be considered exempt. "Highly compensated" in 2020 means they earn at least $107,432 per year. A highly compensated employee could meet the first test for the administrative exemption and not the second but still be considered exempt, for example. Or they could meet the executive exemption if they had responsibility for a department but not hiring and firing authority.
Exempt vs. Non-Exempt: Other Specific Exemptions
Employees who drive large trucks in interstate commerce are exempt from both federal and state overtime requirements. Both federal and state law also exclude outside sales employees, farm workers, fisherman, certain seasonal workers, domestic workers, and several other specific categories. Massachusetts specifically excludes garagemen and employees in restaurants, gas stations, or hospitals or other health care facilities.
Why Do Overtime Exemptions Matter?
For an employee, knowing your true exempt status is important because you may be owed money if you work more than 40 hours a week. It also matters because you may not be held to a non compete agreement under Massachusetts law if you are non-exempt.
For an employer, getting this right can save you a lot of time and expense down the road. If you assume someone is exempt who is not, you could be accruing significant overtime liability. Remember that an employee who wins an overtime claim can get two or three times their actual damages in court. They can also recover their attorneys' fees and costs.
For an employer, getting this right can save you a lot of time and expense down the road. If you assume someone is exempt who is not, you could be accruing significant overtime liability. Remember that an employee who wins an overtime claim can get two or three times their actual damages in court. They can also recover their attorneys' fees and costs.
How Our Employment Lawyers Can Help
We can help you navigate these issues and get clarity on your rights and obligations as an employer or an employee. Read more about some example overtime law cases we have handled. You can use the button below to schedule a call back from a member of our team, or give us a call at 781-784-2322.
