[Webinar] Exempt vs. Non-Exempt

Presented By Jason Zaun of BeyondPay

About the Host

Jason is certified SPHR from the Human Resources Certification Institute and has over 20 years of Human Resources experience. He brings with him a unique perspective on the ever evolving world of Human Resources and looks to educate companies on the latest trends in HR. Through the consultative approach, Jason aims to bring solutions to all workforce management needs to help businesses exceed their goals.

jz@beyondpay.com 800.277.9904 ext 1120

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What We Will Cover Today

1 Introduc3on to the Fair Labor Standards Act

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Exempt Employees

Non-Exempt Employees

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FLSA Training for Managers

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Introduction to the FLSA

The Fair Labor Standards Act (FLSA) was signed in to law by President Roosevelt in 1938.

It set standards for child labor, minimum wage and over3me pay.

It also prohibits gender-based wage discrimina3on (added in 1963 under the Equal Pay Act)

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What are the basic provisions of the FLSA?

Child Labor

Minimum Wage and Over3me Pay

Equal Pay

Restricts the hours that children under age 16 can work and forbids the employment of children under age 18 in certain jobs deemed too dangerous for nonagricultural opera3ons.

Prohibits the employment of children under age 16 during school hours and in certain jobs deemed too dangerous.

Under the FLSA, all employees are considered non-exempt (not exempt from coverage) unless the employees posi3on meets specific exemp3on criteria or unless the regula3ons specifically allow an exemp3on, and the employer has opted to use this exemp3on.

The Equal Pay Act under the FLSA prohibits gender-based wage discrimina3on.

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Penalties for FLSA Violations

Wage and Hour Viola3ons

Inves3gators may recommend changes in employment prac3ces to bring about compliance.

Employers who willfully or repeatedly violate the minimum wage or over3me pay requirements are subject to a civil money penalty of up to $1,100 for each viola3on.

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Penalties for FLSA Violations

The Equal Employment Opportunity Commission (EEOC) administers and enforces the Equal Pay Act. Penal=es for viola=ons are:

Recovery of compensatory damages for inten3onal discrimina3on and puni3ve damages for discrimina3on that's inten3onal and engaged in with malice or reckless indifference to the federally protected rights of the employee.

Caps on the amount of compensatory and puni3ve damages are determined by the size of the employer.

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FLSA Violations

Employees ordinarily bear the burden of proof under the FLSA

If the employer has not adequately maintained records, the court may accept the employees claim and give the employer the burden of disproving allega3ons.

Employers automa3cally bear the burden of proving any exemp3on under the Act.

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FLSA: Statute of Limitations

An ac3on for back wages or over3me should typically go back 2 years from the date the error was found.

A 3-year statute of limita3ons applies in cases where back wages are due to employees because of willful viola3on.

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Common Employer FLSA Mistakes

Considering any employee who is paid a salary as an exempt employee who is not eligible for over3me pay without qualifying the employee for a specific job-related FLSA exemp3on.

Not paying for unauthorized over3me working unauthorized over3me is a disciplinary issue not a compensa3on one.

Making automa3c pay deduc3ons for meal breaks without making sure that an employee has actually taken the unpaid break 3me.

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Defining Exempt & Non-Exempt Employees

Exempt Employees Employees who meet one of the FLSA exemp3on tests and who are paid on a fixed salary basis and not en3tled to over3me.

Non-Exempt Employees

Employees who do not meet any one of the Fair Labor Standards Act exemp3on tests and are paid on an hourly basis and covered by wage and hour laws regarding minimum wage, over3me pay, and hours worked.

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Salary Basis Requirements

To be paid on a salary basis means that the employee regularly receives a predetermined amount cons3tu3ng all or part of the employees salary, which amount is not subject to reduc3on because of varia3ons in the quality or quan3ty of work performed.

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Specific Prohibited Deductions From Salary (Exempt Employees)

Par3al day absences Jury duty and military leave When no work is available

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Exemptions From FLSA Minimum Wage & Overtime Pay Requirements

Execu3ve

Administra3ve

Professional

Computer-Related

Outside Sales

Highly Compensated Employee

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Must be paid at least $455 weekly ($23,660 annually) on a salary basis.

Primary duty must consist of managing the company or a customarily recognized department of the company.

Customarily and regularly direct the work of two or more full-3me employees or equivalents.

Executive Exemption

Examples: Execu3ve officer, controller, vice president, director.

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Must be paid at least $455 weekly ($23,660 annually) on a salary basis.

Primary duty consists of performing office or non-manual work directly related to the management or general business opera3ons of the company.

Work includes the exercise of discre3on and independent judgment with respect to majers of significance.

Examples: manager, supervisor, administrator.

Administrative Exemption

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Must be paid at least $455 weekly ($23,660 annually) on a salary basis.

Primary duty consists of the performance of work that requires advanced knowledge (beyond high school) and that is primarily intellectual in character and includes the exercise of discre3on and independent judgment.

The advanced knowledge is in a field of science or learning.

Examples: accountant, nurse, engineer.

Professional (Learned) Exemption

The advanced knowledge was acquired by a prolonged course of specialized intellectual instruc3on (appropriate academic degree or combina3on of degree and experience).

Learned Professional

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Must be paid at least $455 weekly ($23,660 annually) on a salary basis.

Primary duty consists of the performance of work requiring inven3on, imagina3on, originality or talent in a recognized field of ar3s3c or crea3ve endeavor as opposed to rou3ne mental, manual, or physical work.

Examples: composer, singer, graphic designer.

Professional (Creative) Exemption Crea=ve Professional

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Must be paid at least $455 weekly ($23,660 annually OR at least $27.63/hour; does not have to be paid on a salary basis).

Primary duty consists of The applica3on of system-analyst techniques and procedures, including consul3ng with users to determine hardware, sonware, or systems specifica3ons OR

The design, development, documenta3on, analysis, crea3on, tes3ng or modifica3on of computer systems or programs, OR

The design, documenta3on, tes3ng, crea3on or modifica3on of computer programs related to machine-opera3ng systems, OR

A combina3on of these du3es which requires the same level of skills. Examples: network

analyst, developer, sonware engineer.

Computer-Related Exemption

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Does NOT have to be paid on a salary basis.

Primary duty consists of making sales or obtaining orders for contracts for services or for the use of facili3es for which considera3on is paid by a client or customer.

Customarily and regularly is engaged away from the employers place of business.

Examples: traveling salespersons, contract nego3ators.

Outside Sales Exemption

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Must be paid a total compensa3on of $100,000 or more annually which includes at least $455 per week paid on a salary basis. The $100,000 annually may consist of commissions, nondiscre3onary bonuses and other nondiscre3onary compensa3on.

Customarily and regularly performs at least one of the exempt du3es or responsibili3es of the Execu3ve, Administra3ve, or Professional Exemp3on.

Primary duty consists of performing office, non-manual work

Examples: real estate broker, stock broker.

Highly-Compensated Exemption Highly compensated employees performing execu3ve, professional or administra3ve du3es:

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Definition of Non-Exempt Employee

All employees are considered non-exempt unless the employer establishes that the employees posi3on meets specific exemp3on criteria.

Accordingly, the defini3on of a non-exempt employee is an employee who does not meet any one of the Fair Labor Standards Acts exemp3on tests and is paid on an hourly basis and covered by wage and hour laws regarding minimum wage, over3me pay, and hours worked.

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Time Worked Records

The FLSA requires the following informa=on regarding =me worked by non-exempt employees: Time and day of week when workweek begins Hours worked each day Total hours worked each workweek Basis on which wages are paid (i.e., per hour, piecework) Regular hourly pay rate Total daily or weekly straight-3me earnings Total over3me earnings Addi3ons to or deduc3ons from wages Total wages paid each pay period Date of payment and pay period covered by payment

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Time Worked Records Employers may use any 3mekeeping method they choose3me clocks, manual 3mesheets, electronic 3mesheets, etc.

Under the FLSA, payroll records must be retained for at least three years.

Records on which wages are based (3me cards, 3mesheets, computer records) must be retained for at least two years.

Employers may record employees star3ng and stopping 3mes to the nearest 5 minutes or nearest 1/10th or quarter of an hour, provided that amounts rounded off average out over 3me and do not fail to properly compensate the employee.

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Overtime Pay Requirements For covered, non-exempt employees, the Fair Labor Standards Act (FLSA) requires over3me pay at a rate of not less than one and one-half 3mes an employee's regular rate of pay aner 40 hours of work in a workweek.

Over3me pay is calculated on actual 3me worked. The FLSA does not require over3me pay for work on Saturdays, Sundays, or holidays.

The FLSA does not require over3me pay for work on nights or weekends, simply for working at those 3mes.

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Overtime Pay Requirements

Some excep3ons to the 40 hours per week standard apply under special circumstances:

Compensatory 3me off In many companies, over3me must be authorized in advance by an employees supervisor.

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Compensable Time: Travel Time

Whether travel 3me is compensable 3me depends on the kind of travel involved:

Home-to-work travel is not work 3me and not compensable. Time spent in travel as part of the employees principal ac3vity, such as travel from one job site to another during the workday, is work 3me and must be paid.

When the non-exempt employee travels on a one-day assignment to another city, the 3me spent traveling is work 3me and must be paid.

Time spent traveling to an airport terminal or train sta3on is not treated as hours worked. By contrast, all the 3me spent wai3ng at the terminal un3l arrival at the des3na3on is compensable.

(other than 3me spent on principal work ac3vi3es)

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Compensable Time: Meetings & Trainings

Time spent ajending lectures, mee3ngs, and training programs is counted as hours worked unless ALL of the following condi3ons are met:

The mee3ngs are held outside regular working hours. Ajendance is voluntary. The course, lecture, or mee3ng is not directly related to the employee's job. The employee does no produc3ve work during the mee3ng or training.

Trade school or college courses

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Compensable Time: Rest & Meal Periods

The FLSA does not require rest or meal periods. However, when employers offer these short breaks (usually las3ng about 5 to 20 minutes), they are paid 3me.

Bona fide meal periods (typically las3ng at least 30 minutes) serve a different purpose than rest breaks and are not work 3me and are not compensable.

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Compensable Time: On-Call Duty

Whether on-call or wai3ng 3me is to be treated as working 3me depends on whether the 3me is spent predominantly for the employer's benefit or for the employee's.

An employee who is required to remain on call on the employer's premises is working while "on call" and the 3me is compensable.

An employee who is required to remain on call at home, or who is allowed to leave a message where he/she can be reached, is not working (in most cases) while on call and the 3me is not compensable.

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Managing Overtime

Scheduling and Working Over=me Before over3me is worked, an employee must have approval from his or her manager. Over3me is considered a condi3on of employment, and refusal to accept it when reasonable no3ce has been given is cause for discipline, up to and including termina3on. At the managers' discre3on, an employees work schedule may be adjusted during a workweek to avoid over3me.

Time Worked Approved paid absences, including sick leave, vaca3on leave, holiday leave, Family and Medical Leave Act (FMLA) leave, military leave, jury and witness duty, funeral/bereavement leave, and vo3ng 3me off are paid at an employees regular rate of pay, but are not counted as 3me worked for the purposes of compu3ng over3me.

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