A question which frequently arises in the area of employment law is whether overtime must be paid to employees who work in excess of 40 hours per week. The answer to this question depends on whether the employee is classified as an hourly employee or a salaried employee.
This area of the law is governed by the Fair Labor Standards Act, which is a federal law originally enacted in 1938. Under the FLSA, overtime pay, equal to one and a half times the employee’s hourly rate, must be paid to hourly employees for work in excess of 40 hours per week. However, overtime pay is not required with respect to salaried employees.
Hourly employees are therefore said to be non-exempt employees, while salaried employees are said to be exempt employees.
Many employers assume that they must simply label someone as a salaried employee in order to avoid the payment of overtime for hours worked in excess of 40 per week. However, this is a mistaken assumption which causes many employers to be in violation of the FLSA.
Rather, under the FLSA, an employee cannot be labeled as a salaried employee unless the employee performs an exempt occupation. Generally, exempt occupations are those occupied by executive, administrative and learned professional employees.
An executive employee is one whose primary duty is the management of a portion of the employer’s business. An executive employee must also regularly direct the work of at least two full-time employees, and must have the authority to recommend the hiring, firing or change in job status of the employees he is directing.
An administrative employee is one who has, as his primary duty, the performance of work directly related to the employer’s management operations. He must also have the authority to exercise discretion with regard to significant matters.
A learned professional employee is one who utilizes advanced knowledge which has resulted from prolonged academic training.
In addition, there are also a number of other miscellaneous occupations that are exempt from overtime pay, although each has specific pay requirements, which cannot be detailed in this limited space. These include highly skilled computer professionals, creative professionals, family members in a small family business, some seasonal employees and certain occupations within the sales, forestry, oil, transportation, communications and agricultural industries.
Violations of the FLSA are commonplace and can result in significant fines and penalties, as well as significant claims for the retroactive payment of overtime and for attorney fees incurred by the employee. Therefore, if you are an employer, you should be absolutely certain that your salaried employees are properly classified as salaried employees.
Conversely, if you are classified as a salaried employee, and frequently work in excess of 40 hours per week, it may be wise to educate yourself in order to determine whether you are receiving all of the wages to which you are entitled.
Edward J. Coyle is an attorney with the Buzgon Davis Law Offices, 525 South Eighth Street, Lebanon, Pennsylvania. His column appears the first Tuesday of each month.
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