Last week, U.S. District Judge Amos Mazzant struck the final blow to the highly debated Obama-era overtime expansion rule that would have dramatically changed the way countless industries across the country conduct business, almost doubling the salary threshold last updated in 2004. Mazzant ruled that U.S. Department of Labor had improperly used a salary-level test, instead of job descriptions, when determining eligibility for overtime compensation. The decision of making an employee exempt from overtime is made after thorough review of the duties of the position, not based on the job title assigned.

Although the proposed changes to the FLSA have been defeated, confusion surrounding exempt versus non-exempt remains widespread.  Here’s what you need to demystify your FLSA classifications:

First, most employees are entitled to overtime pay under the FLSA, making them non-exempt employees. Employers must pay them one-and-a-half times their regular pay rate when they work more than 40 hours. Most state calculate overtime based on the employee’s weekly pay schedule. Some states like California that entitle employees to overtime after eight hours. Though non-exempt employees are typically paid hourly, employers can choose to pay them on a salary basis assuming they pay any applicable overtime.

Normally, employees are considered non-exempt unless an exemption applies, at which point they become exempt employees. To qualify for exemption, an employee’s specific job duties and salary (no less than $455 a week) must meet all the requirements of the Department of Labor’s regulations. The main advantages for employers is that you don’t have to track employees’ hours or pay them overtime, regardless of how many hours they work.

There are dozens of specific employment categories that are exempted from overtime requirements, the most common of these are known as white-collar exemptions. Administrative, executive, and professional employees, computer professionals, and outside sales employees fall under this designation. In addition to compensation no less than $455 per week, white-collar exemptions each have their own special requirements specific to the job duties of the position.

For example:

• Executive – must manage an enterprise or a customarily recognized department and must direct at least two full-time employees and have the authority to hire or fire
• Administrative – must have primary office (non-manual) duties related to the general business operations of the employer, including the exercise of discretion and independent judgment
• Professional – work performance must require advanced knowledge acquired by lengthy specialized training, the duties requiring the consistent exercise of discretion and judgment
• Outside Sales – must be making sales or obtaining orders/contracts from customers while employee is regularly away from the employer’s place of business

As always, if you have any questions, you are welcome to call your knowledgeable HR Consultant or email us at clientservices@hr-strategies.com.