Massachusetts Overtime Law for Employers
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Understanding the overtime laws and exemptions is critical for any employer. This is because if you make a mistake and an employee sues for unpaid overtime, you could be required to pay multiple damages and their attorneys' fees, in addition to your own.
Both the federal Fair Labor Standards Act ("FLSA") and Massachusetts overtime law require premium overtime pay for hours worked over 40 in a week for non-exempt employees. Overtime rates are one and a half times an employee's regular hourly rate for each hour over 40. This includes some, but not all, employee travel time. There are exemptions from overtime under both federal and state law. Some are the same, but there are important differences. What you need to know in short:
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Exempt vs. Non-Exempt Employees: The Salary Basis Test
Many people stop at the salary test, and believe that they do not have to pay salaried employees overtime. You need to know that this is only the threshold test- even if your employee is paid on a salary basis, if they either do not meet the minimum salary threshold or their duties are not FLSA exempt, they may still be entitled to overtime pay.
In determining the salary test, it does not necessarily matter that you call an employee's pay "salary." What matters under both Massachusetts and federal law is how the compensation actually works. If the employee’s pay is constant from week to week even though hours worked varies, that employee is probably paid on a “salary basis.” If, however, pay is regularly docked for hours or days missed, it is most likely not “salary."
An employer can apply accrued paid time off ("PTO") to time missed from work without putting the "salary basis" part of the overtime exemption test in danger, so long as the employee actually receives the base amount of pay in each pay period.
In determining the salary test, it does not necessarily matter that you call an employee's pay "salary." What matters under both Massachusetts and federal law is how the compensation actually works. If the employee’s pay is constant from week to week even though hours worked varies, that employee is probably paid on a “salary basis.” If, however, pay is regularly docked for hours or days missed, it is most likely not “salary."
An employer can apply accrued paid time off ("PTO") to time missed from work without putting the "salary basis" part of the overtime exemption test in danger, so long as the employee actually receives the base amount of pay in each pay period.
Exempt vs. Non-Exempt Employees: Minimum Salary Requirement
As noted above, an employee must earn at least $684 per week to be considered exempt. This amount increased beginning in 2020 from $455 per week. That means that as 2020 begins there may be employees who were classified as exempt but no longer meet the minimum earnings test. If your employee makes less than $35,568 per year and is not paid overtime, you may face liability under the overtime statutes for unpaid amounts.
Exempt vs. Non-Exempt Employees: What Are Exempt Duties?
The definition of FLSA exempt duties under federal law is broadly stated as “bona fide administrative, professional, or executive” duties. In addition to many court decisions interpreting what those words mean, the federal Department of Labor has a long list of specific duties that it considers “exempt” under this language. If you are fortunate enough to find the category that fits your employees in the statute or Department of Labor regulations (for example, there are specific rules for outside sales people, computer technicians, actuaries, and numerous other occupations), then you may have your answer.
Most people, however, are left trying to figure out how these exemptions apply to their situation. This is often not straightforward. For example, many retail chains have faced lawsuits by assistant store managers arguing that despite the word "manager" in their title, what they do all day is not really management.
You can read about the exempt duties in more detail. In brief, here are the basic definitions for the types of employees considered exempt from overtime.
Bona Fide Professional Employee. This generally applies to employees whose positions require an advanced degree. The work itself also must require advanced knowledge, and the exercise of discretion and judgment. Examples of professional employees include doctors, lawyers, dentists, teachers, architects and clergy.
Bona Fide Executive Employee. An executive employee must have managerial duties, including actual supervision of other employees and either the authority to hire and fire or substantial input into those decisions.
Bona Fide Administrative Employee. This generally applies to employees who work at a high level in the management or general business operations, and regularly exercise judgment and discretion on significant matters.
Most people, however, are left trying to figure out how these exemptions apply to their situation. This is often not straightforward. For example, many retail chains have faced lawsuits by assistant store managers arguing that despite the word "manager" in their title, what they do all day is not really management.
You can read about the exempt duties in more detail. In brief, here are the basic definitions for the types of employees considered exempt from overtime.
Bona Fide Professional Employee. This generally applies to employees whose positions require an advanced degree. The work itself also must require advanced knowledge, and the exercise of discretion and judgment. Examples of professional employees include doctors, lawyers, dentists, teachers, architects and clergy.
Bona Fide Executive Employee. An executive employee must have managerial duties, including actual supervision of other employees and either the authority to hire and fire or substantial input into those decisions.
Bona Fide Administrative Employee. This generally applies to employees who work at a high level in the management or general business operations, and regularly exercise judgment and discretion on significant matters.
Overtime Rules for Highly Compensated Employees
Under the new Department of Labor regulations implementing federal overtime law, people earning $107,432 or more in total compensation are considered "highly compensated employees." These individuals are considered exempt if they regularly perform any one of the recognized exempt duties above. Prior to 2020, the threshold for a highly compensated employee was $100,000.
A highly compensated employee can reach that threshold through payment other than salary, but needs to receive at least $684 per week in salary. The remaining compensation can come through commissions, bonuses, or other payments.
A highly compensated employee can reach that threshold through payment other than salary, but needs to receive at least $684 per week in salary. The remaining compensation can come through commissions, bonuses, or other payments.
What it Means if Your Employees Are Non-Exempt
If any of your employees are non-exempt, the first thing it means is that they should be paid 1.5 times their regular rate of pay for hours worked over 40 in a week. This applies even if you don't formally track hours.
It also means that under new Massachusetts law those non-exempt can't be held to a non compete. This applies to non compete agreements signed on or after October 1 2018. Note that you can still enforce other post-employment restrictions, like non-solicitation and nondisclosure provisions, regardless of their non-exempt status.
It also means that under new Massachusetts law those non-exempt can't be held to a non compete. This applies to non compete agreements signed on or after October 1 2018. Note that you can still enforce other post-employment restrictions, like non-solicitation and nondisclosure provisions, regardless of their non-exempt status.
How Our Employment Lawyers Can Help
We can help you navigate these issues, make sure your staff is compensated properly, and minimize your legal risk if something goes wrong. 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.
