A few months back I wrote a piece about American overtime laws and how they set clear boundaries about what kinds of workers need to be paid time-and-a-half for any hours per week they work over forty. These laws were enacted to 1)Create more jobs by giving employers incentive to hire more workers at the regular rate instead of paying their existing workers the time-and-a-half rate, and 2)To help workers maintain a better work-life balance, because working a lot of overtime sucks hard.
The rules are laid pretty clearly in the federal Fair Labor Standards Act, which I first learned about when my old job as a school secretary overloaded me with more work than I could possibly handle in a 40-hour workweek and I started doing some research. While the ins and outs of overtime laws are pretty complicated, there’s one damaging misconception I keep hearing over and over and over:
MYTH: “So, like, if you’re a salaried worker, that means you don’t have to make overtime pay, right?”
ANSWER: NO NO NO NO NO!!!!
As this brief guide sums up, by default, all workers are guaranteed time-and-a-half overtime pay. However, some workers are exempt from receiving said overtime pay, meaning the company doesn’t have to pay them overtime if it doesn’t want to. While these overtime-exempt workers are all on salary, some other salaried employees are non-exempt, meaning they have to be paid overtime if they work more than 40 hours. It’s similar to the square-rectangle relationship: “All exempt employees are on salary, but not all salaried employees are exempt.”
In 2015, the Department of Labor under President Obama tried to simplify the overtime laws so that they were not only easier to understand, but would cover all salaried employees who made above $47,500 a year (!). Unfortunately, though, the motion was shot down by a Texas court (lame). Now the Department of Labor notes several times on its website that it’s still in the process of reviewing new overtime regulations, so as of now, the existing laws are all we’ve got to go by.
If I’m a Salaried Employee, How Do I Know Whether I’m Overtime Exempt???
Glad you asked! The FLSA outlines 3 Rules for determining which employees are Overtime-Exempt (don’t have to make overtime pay) vs. which employees are Overtime Non-Exempt (have to make overtime pay).
Two of these rules are easy, but the third is more complicated. Let’s look at them one by one:
1. Overtime-Exempt Workers Have to Be Paid a Salary
This one’s by far the easiest: if your job pays you a lump sum per week or per month for all the time you spend working, then you’re a salaried worker. If you fill out a timesheet or punch a clock and get paid for every hour you work, you’re an hourly worker. If you’re not sure, check the paperwork you got when you were hired, or ask your HR department!
Salaried workers may have certain other kinds of rights in your state as well—for example, according to Chapter 803.02(c) of the employment rules in my home state of New Hampshire, any worker who gets paid a salary is automatically entitled to paid sick days, so check out your own state’s Department of Labor website to see if you’re allowed any similar benefits.
2. The Salary For Overtime-Exempt Workers Has To Be More Than $23,600 a Year
Check your pay stub: if you make more than $455 a week, you pass this test and might be overtime-exempt. (For reference, this works out to about $11.37 per hour, but remember, if you get paid by the hour then you automatically have to make overtime anyway!)
The logic behind this rule is that workers who make less should definitely be paid overtime since they’re the ones who need it the most. Unfortunately, though, the $23,600 figure has been around since 2004 without being adjusted for inflation(!), and before that it was only $8,060 a year(!!!!!!).
3. The Work You Actually Do Has to Pass the Administrative, Executive, Professional, Computer Employee, or Outside Sales Test to Make You Overtime-Exempt
Yikes, that’s a mouthful! This is the most difficult of the three tests, and the one that causes the most confusion since it involves a lot of specifics. That’s why it needs more explaining.
The short version is that when Congress created the Fair Labor Standards Act, they wanted all workers to be paid overtime, but also wanted to give exceptions to certain employees who were highly paid and had higher status at their jobs. These employees weren’t just your average Joes—they were the people who had more power in the workplace, who could make their own decisions without being bullied or taken advantage of, and the ones who had more bargaining power when it came to negotiating salary and benefits. Since these higher-status, white-collar employees already had a lot of power, Congress didn’t see the need to protect them with the overtime laws.
Problems occur, though, when workers further down the ladder get held to the same overtime standards as the people at the top, since they don’t have the leverage in the workplace to defend themselves and lighten their workloads.
The rules are dense but clear about which employees qualify for the white-collar exemption and which ones don’t. To be overtime-exempt, you have to qualify for one of the following:
- The Administrative Exemption
- The Executive Exemption
- The Professional Exemption
- The Computer Employee Exemption
- The Outside Sales Exemption
To quote the FLSA, workers who fall under these categories have one thing in common: “The employee’s primary duty includes the exercise of discretion and independent judgment with respect to matters of significance.”
A quick warning before I move on: don’t take this blog as gospel! Instead, use it as a jumping-off point to doing more research about how these exemptions do or don’t apply to you. The first link in each section goes straight to the US Department of Labor website to get you started, so if you see something that’s close to your situation, go investigate!
The Administrative Exemption
Administrative employees make independent decisions about business operations (i.e., how a company is run). They control the finances, bookkeeping, quality control, purchasing, advertising, human resources, labor relations, or some other aspect of how the business is actually run. They don’t perform the tasks that someone gives them to do—instead, they make the choices about how those tasks will be carried out. They’re the ones making the BIG decisions—which the FLSA refers to as “matters of significance.”
Under these rules, a human resources manager who makes decisions that affect the whole department would be exempt from overtime pay, but the secretaries and regular office workers who carry out those decisions are non-exempt, and need overtime pay to prevent their being taken advantage of.
Also note that teachers fall under the administrative exemption, since they make decisions about the curriculum and makeup of their classrooms, which is why teachers who work really hard all year don’t make overtime pay (…).
The Executive Exemption
To put it simply, executive employees can hire and fire. They manage other employees (“two or more”) by giving them assignments, managing tasks, and maintaining productivity. These are the people other workers go to when there’s a problem, and also the ones who dole out the discipline when needed. In general, they’re the people other workers refer to as “the boss.”
Again, that “matters of significance” phrase comes into play here since these executives are the ones who actually make the decisions about what the people working under them have to do. That’s what makes them the bosses, and why they don’t have to be paid overtime.
The Professional Exemption
Professional employees are people who are highly trained in certain areas and use those skills on the job. In most cases, this means that they have an advanced degree in a specific field.
The FLSA divides professional employees into two areas:
Learned Professionals work in the fields of science or learning. Their fields include engineering, biology, chemistry, advanced technology, architecture, law, accounting, or other fields with accepted professional status. These guys are the real deal: not everybody can walk in off the street and run the proton accelerator.
Creative Professionals deal in areas that require originality and talent. The tasks they do require “intelligence, diligence, and accuracy,” and involve using their imaginations rather than following established rules or techniques. In general, musicians, actors, and certain writers, essayists, journalists, and other creative people qualify for this exemption, but only if their work requires actual innovation rather than just synthesizing someone else’s work.
The Computer Professional Exemption
Computer professionals are unique in that their pay rules are slightly different: they can be paid hourly and still be exempt from overtime, but only if they make more than $27.63 per hour. Otherwise, if they get paid a salary, the over $23,600 a year rule still applies.
Computer employees analyze, create, design and modify software. This involves all the tasks that go along with it, like testing, debugging, dealing with users, and building prototypes. Their software can involve databases, machine systems, and anything else to do with programming. These workers are similar to the scientific professionals noted above since they’re highly skilled and deal in work that not just anyone can walk in and do.
Note that this exemption doesn’t apply to people who repair, manufacture, or otherwise deal with the hardware aspect of the computer business, only with the software end, since overtime laws have traditionally favored people who perform more physical duties. If you take apart and repair PCs all day, you’re safe!
The Outside Sales Exemption
Outside sales employees are the door-to-door salesmen of old. They not only deal in selling things, but do it all over the place, as long as they’re “primarily and customarily engaged away from the employee’s place of business.”
This doesn’t include workers who sell things online or by phone, only workers who actually travel to do their selling. They can sell to consumers or businesses, and can sell any kind of tangible property (computers, food, automatic garage door openers, etc.) or intangible property (advertising, radio time, etc.), but only as their primary duty.
For example, the guide above specifically mentions truck drivers whose primary duty is to deliver goods, but who might also do some selling along the way—they’re non-exempt because their primary duty is delivering.
Why Am I Telling You All This?
It’s important to be informed about your rights at work so you can stop any unfair treatment (intentional or unintentional) and get the overtime pay you’re legally entitled to. Since these rules can be harrowing to even the most seasoned of HR personnel, familiarizing yourself with your individual case can put you in a better position to know when you’re being taken advantage of and have the discussions that lead to fixing it.
Again, though, I caution you—if you’ve just gotten through this and think that you qualify for overtime pay because you don’t meet any of the exemptions listed here, check out the Department of Labor’s official guides to research your individual case more thoroughly.
…also, just so we’re all 100% clear, I’m definitely not writing or researching this topic because of anything suspicious or underhanded that might be going on at my Secret Office Day Job, which I openly declare would never even think of breaking federal laws by withholding overtime pay from its non-exempt salaried employees. No, it’s merely a coincidence that I’m posting this topic at this exact time, and assure you that we’re not having any of those kinds of problems at all.
Of course, if we ever did have any of those problems at my secret Office Day Job, I definitely wouldn’t post about them here, because, you know, I’d want to keep them a secret ;-)
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