Exempt – Non Exempt Employees CGA Supervisory Training

Exempt vs Non-exempt Employees Most workers are classified as either exempt or non-exempt depending on their salary and the type of work they do. The federal Fair Labor Standards Act (FLSA) requires that in addition to paying at least the minimum wage employers also must pay overtime to employees who work more than 40 hours in a given workweek, unless they meet certain exceptions. It’s important to make sure that workers meet the requirements for their FLSA classifications and our state’s wage and hour laws. In addition to regular non-exempt employees and exempt employees, there are several other classifications of workers. They include: volunteers, trainees, interns, independent contractors, and temporary employees.

Definition of Non-exempt Employee Most employees are entitled to overtime pay under the Fair Labor Standards Act (FLSA). They are called non-exempt employees (also known as “salary” employees). Employers must pay them one-and-a-half times their regular rate of pay when they work more than 40 hours in a week. It’s usually illegal to give non-exempt employees comp time (time off) instead of paying them overtime.

Definition of Exempt Employee Exemptions from the overtime requirements of the FLSA are just that — exceptions to the rule. They are very narrowly construed, and employers will always bear the burden of proving that they have correctly classified an employee as exempt. Exempt employees are expected to work whatever hours are necessary to accomplish the goals and deliverables of their exempt position. Thus, exempt employees may have more flexibility in their schedules to come and go as necessary to accomplish work than non-exempt or hourly employees. The FLSA provides an exemption from overtime pay for employees employed as bona fide executive, administrative, professionals, certain computer and outside sales employees. To qualify for exemption, employees generally must meet certain tests regarding their job duties and be paid on a salary basis at not less than $455 per week. Job titles do not determine exempt status. In order for an exemption to apply, an employee’s specific job duties and salary must meet all the requirements of the FLSA regulations.

Executive Employee Exemption To qualify for the executive employee exemption, all of the following tests must be met: The employee must be compensated on a salary basis at a rate not less than $455 per week; The employee’s primary duty must be managing the enterprise, or managing a customarily recognized department or subdivision of the enterprise; The employee must customarily and regularly direct the work of at least two or more other full-time employees or their equivalent; and The employee must have the authority to hire or fire other employees, or the employee’s suggestions and recommendations as to the hiring, firing, advancement, promotion or any other change of status of other employees must be given particular weight.

Administrative Employee Exemption To qualify for the administrative employee exemption, all of the following tests must be met: The employee must be compensated on a salary or fee basis at a rate not less than $455 per week; The employee’s primary duty must be 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 The employee’s primary duty includes the exercise of discretion and independent judgment with respect to matters of significance.

Learned Professional Employee Exemption To qualify for the learned professional employee exemption, all of the following tests must be met: The employee must be compensated on a salary or fee basis at a rate not less than $455 per week; The employee’s primary duty must be the performance of work requiring advanced knowledge, defined as work which is predominantly intellectual in character and which includes work requiring the consistent exercise of discretion and judgment; The advanced knowledge must be in a field of science or learning; and the advanced knowledge must be customarily acquired by a prolonged course of specialized intellectual instruction.

Creative Professional Employee Exemption To qualify for the creative professional employee exemption, all of the following tests must be met: The employee must be compensated on a salary or fee basis at a rate not less than $455 per week; The employee’s primary duty must be the performance of work requiring invention, imagination, originality or talent in a recognized field of artistic or creative endeavor.

Computer Employee Exemption To qualify for the computer employee exemption, all of the following tests must be met: The employee must be compensated either on a salary or fee basis at a rate not less than $455 per week or, if compensated on an hourly basis, at a rate not less than $27.63 an hour; The employee must be employed as a computer systems analyst, computer programmer, software engineer or other similarly skilled worker in the computer field performing the duties described below: The employee’s primary duty must consist of: The application of systems analysis techniques and procedures, including consulting with users, to determine hardware, software or system functional specifications; The design, development, documentation, analysis, creation, testing or modification of computer systems or programs, including prototypes, based on and related to user or system design specifications; The design, documentation, testing, creation or modification of computer programs related to machine operating systems; or 4) A combination of the aforementioned duties, the performance of which requires the same level of skills.

Highly Compensated Employees Highly compensated employees performing office or non-manual work and paid total annual compensation of $100,000 or more (which must include at least $455 per week paid on a salary or fee basis) are exempt from the FLSA if they customarily and regularly perform at least one of the duties of an exempt executive, administrative or professional employee identified in the standard tests for exemption.

Blue Collar Workers The exemptions provided by FLSA apply only to “white collar” employees who meet the salary and duties tests. The exemptions do not apply to manual laborers or other “blue collar” workers who perform work involving repetitive operations with their hands, physical skill and energy. FLSA-covered, non-management employees in production, maintenance, construction and similar occupations such as carpenters, electricians, mechanics, plumbers, iron workers, craftsmen, operating engineers, longshoremen, construction workers and laborers are entitled to minimum wage and overtime premium pay under the FLSA, and are not exempt no matter how highly paid they might be.

Exempt Employees Being paid on a “salary basis” means the employee regularly receives a predetermined amount of compensation each pay period on a weekly basis. This predetermined amount cannot be reduced because of variations in the quality or quantity of the employee’s work. However, since our organization provides policies for earning pay time off – vacation and sick leave, the time can be deducted from their earned vacation and sick bank. Subject to exceptions (next slide), an exempt employee must receive the full salary for any week in which the employee performs any work, regardless of the number of days or hours worked. Exempt employees do not need to be paid for any workweek in which they perform no work.

Exempt Employees Circumstances in Which the Employer May Make Deductions from Pay: Deductions from pay are permissible: If absent from work for one or more full days for personal reasons other than sickness or disability; If absent one or more full days due to sickness or disability if the deduction is made in accordance with a bona fide plan, policy or practice of providing compensation for salary lost due to illness (sick leave policy); To offset amounts employees receive as jury or witness fees, or for military pay; For penalties imposed in good faith for infractions of safety rules of major significance; For unpaid disciplinary suspensions of one or more full days imposed in good faith for workplace conduct rule infractions. Also, an employer is not required to pay the full salary in the initial or terminal week of employment, or for weeks in which an exempt employee takes unpaid leave under the Family and Medical Leave Act.

Exempt Employees Exempt employees must receive the same amount of pay every pay period, regardless of how many hours they work. This means if exempt employees leave an hour early, you can deduct it from their sick or vacation bank (you can discipline them, but you must pay them the full salary regardless). Managers can require strict schedules from exempt employees, but it's generally better to allow some flexibility in completing their jobs. Remember, they don’t get pay extra if they work over 40 hours. For an exempt employee, it's all about accomplishment and not about hours worked.

Exempt Employees Minimum salary: In order to be exempt from overtime, the current minimum salary level (as of October 2015) is $455 a week. However, the Department of Labor was considering raising it to $47,892 for the first year and then to $50,440 per year. This has not been approved to-date.

Other Considerations Exempt Employees Are Often Full Time Employees. The FLSA does not define what is a full time or part time employee. What is counted as a full time employee is generally defined by the employer by policy. CGA’s definition of a full time employee is published in our employee handbook. A full time employee works 40 hours per week, with the expectation that exempt employees will work the hours necessary to accomplish their jobs. A non-exempt employee must be paid overtime for time worked in excess of 40 hours. Employees that are scheduled to work over 30 hours per week are considered full time and eligible for benefits such as health insurance, and vacation and sick time. In addition, CGA enables some eligible part time employees to earn a pro-rated set of benefits.

Resources This is a wide-ranging and comprehensive topic. General rules apply. However, specific circumstances may required a detailed and in depth analysis. Questions and/or concerns should be immediately referred to our HR Department. Other resources: http://www.dol.gov/whd https://www.dol.gov/whd/overtime/fs17a_overview.pdf

Exceptional Team – Exceptional Solutions Acknowledgement of Training – Exempt/Non-Exempt I acknowledge through my e-mail submittal below that, on this date, I reviewed the training session. I further acknowledge that I understood the training and the CGA, Inc. expectations, and I will act consistently with those expectations. I also understand that if I have questions or concerns regarding the matters covered by the training, that I can address those with Human Resources. Please click the button below to submit an e-mail to HR for training acknowledgement. Submit Acknowledgement