Category: Wage & Hour

Exempt Employees

How Much Should Exempt Employees Get Paid?

One of 2016’s hot topics in employment law was how high the salary threshold for FLSA exemption would increase? In other words, how much would employer have to pay exempt employees to keep them exempt? It’s mid-2017, and the question hasn’t gone away!

The U.S. Department of Labor initially answered that question with a $913/week salary requirement. That threshold would then change every three years based on average salary levels.

However, a federal court in Texas stopped the new salary rule before it took effect. That case remains on appeal, but the Department of Labor–now under a Republican administration–has indicated it will not fight to uphold the $913/week standard. Instead, the DOL has announced that it will review the relevant rules and establish a new test.

On July 26, 2017, the DOL issued a Request for Information seeking information related to the FLSA exemption rules. In particular, the DOL refers to the executive, administrative, professional, outside sales, and computer employee exemptions.

What Tests for Exempt Employees?

Based on the Request for Information, it looks like the DOL is open to reviewing all aspects of the exemptions. This includes not only the salary level for exempt employees, but also the duties tests.

Here are some of the specific questions the DOL is asking:

  1. Would updating the 2004 salary level ($455/week) for inflation be an appropriate basis for setting the standard salary level and, if so, what measure of inflation should be used?
  2. Should the regulations contain multiple standard salary levels? If so, how should these levels be set: by size of employer, census region, census division, state, metropolitan statistical area, or some other method?
  3. Does the standard salary level set in the 2016 Final Rule ($913/week) work effectively with the standard duties test or, instead, does it in effect eclipse the role of the duties test in determining exemption status?
  4. To what extent did employers, in anticipation of the 2016 Final Rule’s effective date on December 1, 2016, increase salaries of exempt employees in order to retain their exempt status, decrease newly non-exempt employees’ hours or change their implicit hourly rates so that the total amount paid would remain the same, convert worker pay from salaries to hourly wages, or make changes to workplace policies either to limit employee flexibility to work after normal work hours or track work performed during those times?
  5. Did employers make any additional changes, such as reverting salaries of exempt employees to their prior (pre-rule) levels, after the preliminary injunction was issued?
  6. Would a test for exemption that relies solely on the duties performed by the employee without regard to the amount of salary paid by the employer be preferable to the current standard test?
  7. Does the salary level set in the 2016 Final Rule exclude from exemption particular occupations that have traditionally been covered by the exemption and, if so, what are those occupations?
  8. Should there be multiple total annual compensation levels for the highly compensated employee exemption?
  9. Should the standard salary level and the highly compensated employee total annual compensation level be automatically updated on a periodic basis to ensure that they remain effective, in combination with their respective duties tests, at identifying exempt employees?

Help the DOL Get it Right

The DOL will accept public comments on the Request for Information until September 25, 2017. Anyone can submit information related to these issues affecting exempt employees. You can expect prominent employee, labor, and business groups to do so.

I am currently considering submitting comments based on my experience representing employers in employee classification and overtime for more than a decade. If you have any information that you would like to share in connection with my preparation of those comments, please email me.

DISCLAIMER: No attorney-client relationship will be created by you emailing me information! If you need legal representation, whether in connection with employee exemption issues otherwise, please speak with me (or another attorney of your choice) before sending confidential information.

Administrative Exemption

Administrative Exemption – A Quick Guide for New York Employers

Most New York employers are subject to both federal and state minimum wage and overtime requirements. In most cases, this means the employer must pay its employees at least the minimum wage for all hours worked and time-and-a-half for hours over 40 in a week. There are, however, many exceptions to these requirements. This post addresses the administrative exemption under both the FLSA and New York law.

(Click here for A Quick Guide of the New York State and federal Professional exemptions.)

(Click here for A Quick Guide of the New York State and federal Executive exemptions.)

FLSA Administrative Exemption

Despite the name, the “administrative” exemption does not necessarily apply to administrative assistants or certain other employees with “administrative” roles. In fact, it more often applies to director and executive level employees.

Under the FLSA (the federal minimum wage/overtime law), employees may be exempt under the administrative exemption if:

  1. They are compensated on a salary or fee basis of at least $684 per week;
  2. Their primary duty is the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers; and
  3. Their primary duty includes the exercise of discretion and independent judgment with respect to matters of significance.

New York Administrative Exemption

Under New York State law, employees can be exempt from minimum wage and overtime requirements if:

  1. Their primary duties consist of the performance of office or non-manual field work directly related to management policies or general operations of the employer;
  2. They customarily and regularly exercise discretion and independent judgment;
  3. They regularly and directly assists the employer or an executive employee, or perform, under only general supervision, work along technical or specialized lines that requires special training, experience or knowledge; and
  4. They receive a sufficient weekly salary*.

*The weekly salary threshold now depends on geographic location within New York State. For more, see 2023 New York Minimum Wage.

Summary

Some of the areas in which employees eligible for the administrative exemption may work include: finance, accounting, purchasing, marketing, research, human resources, IT, and legal. But not all employees in these areas are eligible for exemption.

The administrative exemptions only apply to certain employees whose actual job situations meet the requirements. Job titles do not automatically determine exemption, nor does the fact that the employee receives a salary.

Employers should periodically review employees’ job duties to determine whether they qualify for exemption.

In addition, employers must consider whether an employee’s salary remains high enough to qualify for the exemption. Under New York law, the threshold is increasing annually, and at higher rates in some parts of the state. Remember that it is not enough to satisfy the federal salary threshold. When the New York threshold is higher, the employee would need to receive the higher salary level to be fully exempt (unless a different New York state exemption applies).

Read about the New York State and FLSA Professional Exemptions here.

Read about the New York State and FLSA Executive Exemptions here.

 

Check out my Employment Law Dictionary here!

Executive Exemption

Executive Exemption – A Quick Guide for New York Employers

Most New York employers are subject to both federal and state minimum wage and overtime requirements. In most cases, this means the employer must pay its employees at least the minimum wage for all hours worked and time-and-a-half for hours over 40 in a week. There are, however, many exceptions to these requirements. This post addresses the executive exemption under both the FLSA and New York law.

(Click here for A Quick Guide of the New York State and federal Professional exemptions.)

(Click here for A Quick Guide of the New York State and federal Administrative exemptions.)

FLSA Executive Exemption

Despite the name, the “executive” exemption does not necessarily apply to all executives in a company. In fact, it often applies to employees who are not company executives.

Under the FLSA (the federal minimum wage/overtime law), employees may be exempt under the executive exemption if:

  1. They are compensated on a salary or fee basis of at least $684 per week;
  2. Their primary duty is management of the enterprise or of a customarily recognized department or subdivision of it;
  3. They customarily and regularly direct the work of two or more other employees; and
  4. They have the authority to hire or fire other employees or their suggestions and recommendations as to the hiring, firing, advancement, promotion or any other change of status of other employees are given particular weight.

New York Executive Exemption

Under New York State law, employees can be exempt from minimum wage and overtime requirements if:

  1. Their primary duties consist of management of the enterprise or a subdivision of it;
  2. They customarily and regularly direct the work of two or more other employees;
  3. They have the authority to hire, promote, advance, or fire other employees, or to effectively recommend such actions;
  4. They customarily and regularly exercise discretionary powers; and
  5. They receive a sufficient weekly salary*.

*The weekly salary threshold now depends on geographic location within New York State. For more, see 2023 New York Minimum Wage.

Summary

The executive exemptions only apply to certain employees whose actual job situations meet the requirements. Job titles do not automatically determine exemption, nor does the fact that the employee receives a salary.

Employers should periodically review employees’ job duties to determine whether they qualify for exemption. For example, employees who previously supervised multiple employees, but now only supervise one, will no longer qualify for the executive exemption.

In addition, employers must consider whether an employee’s salary remains high enough to qualify for the exemption. Under New York law, the threshold is increasing annually, and at higher rates in some parts of the state. Remember that it is not enough to satisfy the federal salary threshold. When the New York threshold is higher, the employee would need to receive the higher salary level to be fully exempt (unless a different New York state exemption applies).

Read about the New York State and FLSA Professional Exemptions here.

Read about the New York State and FLSA Administrative Exemptions here.

 

Check out my Employment Law Dictionary here!