President Obama continues to push for reform in wage and hour law. Discussions about the Federal Minimum Wage are always popular, and the president has asked the labor department to revamp its regulations to include paying overtime to “executive or professional,” also known as “exempt,” employees. Currently, under the Fair Labor Standards Act (FLSA), employees that meet the requirements may be classified as exempt, and therefore, not entitled to overtime pay.
Certain employees qualify as “exempt” from the overtime provisions of state and federal wage laws. In addition to specific occupations that fall within the exemptions, there is general exclusion for executive, administrative, or professional employees. Classifications must be made properly because the consequences for misclassifying employees can be expensive. Job titles alone are not sufficient to determine whether an employee is exempt. The FLSA sets forth specific tests for determining whether an employee qualifies as exempt.
Massachusetts uses the same tests that the Department of Labor has established. Under the current regulations, an employee that meets the “duties” test and is paid at least $455.00 per week can qualify as exempt. The duties tests are not always easy to determine, and exemptions may be incorrectly applied.
In general, under the test, executive employees have the primary duty of management, they direct the activities of two or more other employees, and an executive possesses the authority to hire and fire other employees. Administrative employees perform non-manual, office work that relates directly to the management or operations of the organization, and their duties include using discretion and independent judgment for matters of significance. Professional employees can be learned or creative professionals. These positions require an advanced knowledge in a field or a high level of creative talent and can include positions such as doctors, lawyers, teachers, musicians, and actors. Exemptions may also apply to certain high compensation employees and also to computer analysts and outside salespeople.
While it is uncertain exactly what changes might come, it is clear that many employees may be impacted by the proposed expansion. Under current law, determining the exemption status of an employee can be challenging, and a wrongful classification may lead to the extensive penalties under Massachusetts wage and hour law. Therefore, it is highly recommended that when reviewing the exempt/non-exempt status of employees and consultants, legal representation is in order, to be sure that the classifications are appropriate.
Image credit: Phil Whitehouse under Creative Commons license