Tag: exemption

Overtime Exemptions for New York Employers

Overtime Exemptions for New York Employers (Webinar)

On January 23, 2018, I presented a complimentary webinar on Overtime Exemptions for New York Employers. For those who couldn’t attend the live webinar, I’m happy to make it available for you to watch at your convenience.

In the webinar, I discuss the most common overtime exemptions under the Fair Labor Standards Act and New York law, including:

  1. Executive Exemption
  2. Administrative Exemption
  3. Professional Exemption
  4. Outside Sales Exemption
  5. Computer Employee Exemption
  6. Highly Compensated Employee Exemption

Don’t have time to watch the whole webinar right now? Click here to download the slides from the webinar.

Why You Should Watch This Webinar

Most New York employers must ensure compliance with both the New York and federal overtime laws. Improperly classifying an employee as exempt can result in huge financial liabilities. Employees can recover not only the amount of overtime pay they should have received, but also an equal amount in liquidated damages. Plus, they can recover their attorney’s fees from the employer.

Employers with as few as one employee may have to pay overtime unless an exemption applies! And not all salaried employees qualify for exemptions!

The Overtime Exemptions for New York Employers webinar walks you through the various components of each of these categories of exemptions, specifically noting federal and New York State distinctions.

Learn where the duties tests differ between the FLSA and New York law. Find out what happens if an employee is exempt under one law but not the other. Get predictions on what changes may be coming up!

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Outside Sales Exemption

Outside Sales Exemption – A Quick Guide for New York Employers

Most New York employers are subject to both federal and state minimum wage and overtime requirements. Usually, 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 outside sales exemption under both the Fair Labor Standards Act (FLSA) and New York law.

Employers sometimes rely on the “outside sales” exemption to cover all categories of sales employees. But the “outside” component is critical for exemption. Sales employees who do not qualify under the outside sales exemption may still qualify for another exemption, such as the executive or administrative exemptions.

Learn more through this free webinar: Overtime Exemptions for New York Employers: What You Don’t Know CAN Hurt You!

FLSA Outside Sales Exemption

To qualify for the outside sales exemption under the FLSA (the federal minimum wage/overtime law):

  1. The employee’s primary duty must be making sales or obtaining orders or contracts for services or for the use of facilities for which a consideration will be paid by the client or customer; and
  2. The employee must be customarily and regularly engaged away from the employer’s place or places of business.

Unlike the administrative, executive, and professional exemptions, the FLSA salary requirements do not apply to the outside sales exemption.

An outside salesperson must travel to customers, usually at their places of business or homes. Selling solely by phone, mail, or the Internet does not qualify as outside sales.

“Sales” includes any sale, exchange, contract to sell, consignment for sales, shipment for sale, or other disposition. Promotional work that is related to the employee’s own outside sales or solicitation efforts qualifies as exempt work.

New York Outside Sales Exemption

The FLSA and New York outside sales exemptions are very similar.

Under New York State law, employees can be exempt from minimum wage and overtime requirements if they are customarily and predominantly engaged away from the premises of the employer and not at any fixed site and location for the purpose of:

  • Making sales;
  • Selling and delivering articles or goods; or
  • Obtaining orders or contracts for service or for the use of facilities.

Like the FLSA, New York has no salary requirement for outside sales employees. However, New York does require that commissioned salesperson have a written agreement establishing the terms of their compensation. For outside sales employees whose primary compensation comes through a salary or hourly wage, employers still must satisfy the State’s wage notice requirements.

Summary

In the past, this exemption covered more employees who actually went “door-to-door” or at least made home sales calls. Now, since most consumer purchases occur through the Internet, the exemption it is more prevalent among business-to-business sales employees.

But remember, the outside sales exemption only applies to certain employees whose actual job situations meet the requirements! Job titles do not automatically determine exemption, nor does the fact that the employee is involved in making sales.

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

To learn more, check out my related webinar: Overtime Exemptions for New York Employers: What You Don’t Know CAN Hurt You!

Employee Classification Mistakes

5 Employee Classification Mistakes

Let’s face it, most organizations are in business to do something other than worry about how they classify their employees. They have products or services to offer, and they want to do so efficiently and effectively. Unfortunately, because it’s not their area of expertise, many businesses make employee classification mistakes despite their good intentions. But, here’s an opportunity to correct those mistakes!

These are 5 of the most common employee classification mistakes I see from good companies who really are trying to do the right thing.

(If this looks like too many words on a page, you might prefer my webinar: Overtime Exemptions for New York Employers: What You Don’t Know CAN Hurt You!)

1. Contract Designation vs. Legal Reality

Perhaps the first lesson in employment law should be “just because it’s on paper, doesn’t make it so!” One area this applies is the threshold question of whether a worker is an employee or an independent contractor. Often, businesses and workers prefer the “independent contractor” designation for various reasons. So, they execute a contract that says that the person is not an employee of the company. Unfortunately, it’s not that easy.

It turns out that a lot of government entities care about the “independent contractor” vs. “employee” classification. This includes the IRS and state taxing authorities, state unemployment and workers’ compensation authorities, departments of labor and other agencies enforcing labor and employment laws, and the courts. And, usually, the government’s “preference” is to find a worker to be an “employee.”

Frankly, having a piece of paper that says a person is not an employee tends to be one of the least relevant factors in this determination. It’s nice to have, and you really do want to have a written contract if you’re trying to prove an independent contractor relationship. But the government looks at many aspects of the relationship to evaluate whether the worker qualifies as an employee under whatever law is in question (e.g., minimum wage, employment tax withholding, etc.).

Some factors that matter more than words on the page include:

  • Who provides the tools and equipment the worker uses?
  • Does the worker operate a business and have other customers?
  • Does the worker control the timing and means of getting the work done?
  • Is the worker directly involved in the company’s core business or just enabling the company to get its business done?

Cautious companies will consider these and other questions carefully before entering into an agreement with a potential independent contractor. The agreement should confirm the factors that will support the classification. But, again, the contract itself won’t be the deciding factor.

2. “Salary” vs. “Hourly”

Sure, it’s fine to classify some employees as “salary” and others as “hourly.” But these categories only go so far. One of the most common employee classification mistakes is equating salaried with exempt and hourly with non-exempt for overtime purposes.

Paying an employee a salary does not automatically exempt them from receiving overtime under the FLSA and state laws. And, it goes the other way too. Some hourly employees can still be exempt from overtime (though this is relatively rare).

The most prevalent overtime exemptions are the so-called “white collar” exemptions. These include administrative, executive, professional, computer employee, and outside sales exemptions. Some exemptions require that employees be paid on a salary basis. But that is never the only requirement! The nature of the employee’s work must also satisfy certain tests. Moreover, the FLSA has no salary requirement for the outside sales exemption and certain professional categories (doctor, lawyer, and teacher). And qualifying computer employees can be exempt even if they receive an hourly wage.

To better understand the overtime exemptions, check out my free webinar: Overtime Exemptions for New York Employers: What You Don’t Know CAN Hurt You!

3. “Full-time” vs. “Part-time”

Again, this is a useful designation. But it’s not a one-size fits all classification. Even within the same workplace, two “full-time” employees may work different schedules and total numbers of hours in a week. The same may be true for two “part-time” employees.

Like with “salary” vs. “hourly,” “full-time” vs. “part-time” doesn’t necessarily signify whether an employee is eligible to receive overtime pay.

When labor and employment laws use these or similar terms, they mean different things depending on the law. The Affordable Care Act defines full-time to mean the employee works an average of 30 hours per week. By contrast, New York’s new Paid Family Leave law draws a line at 20 hours per week. So does the federal WARN Act, which requires employers to give written notice before certain mass layoffs and plant closings.

So, it’s important for employers to understand the context in which a particular employee is part-time or full-time. Day-to-day, the distinction probably depends not on external laws, but how the employer itself defines the categories, such as for employee benefits eligibility like vacation and holiday pay. But understand that failing to draw the correct line for specific legal analyses is another of the most problematic employee classification mistakes.

4. Job Description vs. Actual Duties

For employment law purposes, there are many reasons why it may matter what a particular employee’s job entails. Most of the time that inquiry should not end with reviewing a written job description. Like the written designation of a worker as an independent contractor instead of an employee, words on a page describing what the employee’s position entails is seldom determinative. Rather, you must know what this specific person actually does for the organization.

For starters, this is critical in classifying employees as exempt vs. non-exempt. It also comes into play in determining essential functions of an employee’s position for disability accommodation purposes.

Yes, it is nice when the written job description accurately reflects what the employee actually does. And this is a good reason to regularly review and update your job descriptions. But organizations often prepare a job description when they create a position and then use it for years without reevaluating it. The employees in the role probably have changed, as have the exact tasks of the job.

5. Union vs. Non-Union

The last of these employee classification mistakes is only relevant if a union represents (or perhaps is seeking to represent) some of your employees. That’s a diminishing percentage of U.S. workplaces, but still a significant number of them.

Obviously, it is important to know which employees are in the union bargaining unit and which are not. In Right-to-Work states that won’t necessarily be same as which employees are actually members of the union. But, regardless, if they are in the bargaining unit, then the employer must deal with the union directly rather than the employee regarding certain matters.

But, like some of other employee classification mistakes above, “union” vs. “non-union” does not legally equate to whether an employee is exempt or non-exempt from overtime. Or whether they are protected by federal or state leave laws or other benefits matters.

Typically, having unionized employees just adds another layer to an already complex web of labor and employment law compliance issues. It is often critical to break out the pieces of the web to analyze and address them properly.

Avoiding Employee Classification Mistakes

The best way for most organizations to avoid costly employee classification mistakes is to consult with an experienced labor and employment lawyer. But, admittedly, it’s hard to know when you are wandering into a trap for the unwary such that legal advice is necessary.

I try to help New York employers know when to ask for guidance through this blog and my email newsletter. I also present free webinars, such as Auditing Your New York Worker Classifications.