Some salaried employees are exempt from certain provisions of the federal Fair Labor Standards Act. This does not mean compensation for exempt employees isn’t governed by the FLSA. Rather, a different set of rules applies to exempt workers.
Exempt and Nonexempt Salaries
Most employees are covered by the FSLA. Salaried workers are either exempt or non-exempt. Employers don’t have to comply with minimum wage or overtime rules when paying exempt employees – that’s essentially what exempt means. However, exempt employees must be paid no less than $455 per week regardless of the number of hours worked. Non-exempt employees may be paid a fixed salary, but it has to be at least equal the federal minimum wage, or the state minimum wage if the latter is higher. Non-exempt employees must be paid 1.5 times their regular pay rate for all hours over 40 worked in a week.
Eligibility for Exempt Status
Although any employee can be compensated with a salary, only some jobs qualify for exempt status. Job responsibilities are what count, not job titles. Executive or administrative employees may be exempt only when the work is primarily managerial in nature. Executive positions must include supervision of two or more employees. Both executive and administrative workers must have meaningful authority to make independent decisions. Professionals whose work is primarily intellectual can be exempt. Examples of professionals are doctors, engineers and lawyers. Professions also include jobs creating music, images, written works and other intellectual products. Finally, outside sales representatives and some computer professionals can be exempt.
Salary Reduction Rules
Employers generally cannot reduce an exempt employee’s salary if she works fewer hours than normal. When an exempt employee does any work on a given day she is paid for the entire day. Employers may deduct missed work under some circumstances if the employee misses an entire day, such as if the employee takes the time off for personal reasons or takes sick leave after using all his sick days. Unpaid days off can also be used as a disciplinary measure. However, when employers furlough exempt employees for business reasons, they must pay the full salary unless the furlough lasts a full week.
Non-Exempt Salaried Workers
Because non-exempt salaried employees fall under the minimum wage and overtime guidelines of the FLSA, employers must state a specific number of hours the employee is expected to work. This allows the salary to be expressed as an hourly rate. In the event the employee works more than 40 hours in a week, the hourly rate is used to calculate overtime pay. Unlike exempt employees, non-exempt employees are not protected by federal law against salary deductions for working fewer hours. Some states do limit salary reductions. For example, Wisconsin labor law prohibits employers from docking a non-exempt employee’s salary except in the same circumstances that generally apply to exempt employees.