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FLSA: Classifying Exempt Workers

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in Leaders & Managers,Management Training

To be considered exempt from overtime, an employee must generally be paid on a salary basis and his or her job duties must meet the Labor Department's standards for one of the six exemption categories discussed below.

Use this self-audit to test whether you're properly classifying workers as exempt under the FLSA:

Executive Employee

Answer the following questions to determine whether you've misclassified a worker as an exempt executive:

  1. Is the employee's primary duty managing the enterprise or a department or subdivision of the enterprise?
  2. Does the employee customarily direct the work of two or more other employees or their equivalent?
  3. Does the employee have the authority to hire or fire, and do his or her recommendations carry significant weight if unauthorized to make the final decision?
  4. Is the employee paid the equivalent of at least $455 per week on a salary basis?

If you answered "No” to any of these questions, you may have misclassified the worker as an exempt executive.

Note: If the employee is at least a 20 percent owner of the business and meets requirements #1 and #2 above, he or she need not meet the salary requirement in #4 or the authority requirement in #3.

Misclassification lawsuits and settlements are costing employers millions. Don't you be one of them. Use this guide to help you decide: Exempt or Nonexempt? How to Make the Call and Avoid FLSA Overtime Lawsuits

Administrative Employee

Answer the following to determine whether a worker is misclassified as an exempt administrative employee:

  1. Is the employee's primary duty performing office or non-manual work directly related to the management or general business operations of the employer or the employer's customers?
  2. Does the employee exercise discretion and independent judgment with respect to matters of significance? That is, does he or she evaluate and compare possible courses of action and then make a decision or recommendation after considering the various possibilities?
  3. Is the employee paid the equivalent of at least $455 per week on a salary basis?

If you answered "No” to any of these questions, the employee may be misclassified as exempt administrative.

Learned Professional Employee

Answer the following to determine whether a worker is misclassified as an exempt learned professional:

  1. Is the employee's primary duty to perform work requiring knowledge of an advanced type in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction?
  2. Is the advanced knowledge obtained by completing an academic course of study resulting in a four-year college degree or leading to certification?
  3. Is the employee paid the equivalent of at least $455 per week on a salary basis?

If you answered "No” to any of these questions, the employee may be misclassified as an exempt learned professional. Exception: Those who've completed the educational requirements for a law or medical degree need not meet the minimum salary requirement. Also, teachers need not be certified or meet the minimum salary requirement to qualify as learned professionals.

Creative Professional Employee

Answer the following to determine whether a worker is misclassified as an exempt creative professional:

  1. Is the employee's primary duty to perform work requiring invention, originality or talent in a recognized field of artistic endeavor such as music, writing, acting and the graphic arts?
  2. Does the work require more than intelligence, diligence and accuracy (i.e., does it require "talent”)?
  3. Is the employee paid the equivalent of at least $455 per week on a salary basis?

If you answered "No” to these questions, you may have misclassified a worker as an exempt creative professional.

Under the FLSA, some employees ARE exempt from overtime. If you understand the law, you can achieve big payroll savings. But as many as 40% of employers are misclassifying workers. Are you? Allow or deny overtime pay knowing the law is on your side...

Computer Professional

Answer the following to determine whether a worker is misclassified as an exempt computer professional:

  1. Is the employee paid at least $455 per week on a salary or fee basis or, if paid hourly, at a rate of not less than $27.63 per hour?
  2. Is the employee's primary duty:
  • Application of system analysis techniques and procedures, including consulting with users, to determine hardware, software or system functional specifications; or
  • 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; or
  • Design, testing, documentation, creation or modification of computer programs related to machine operating systems; or
  • A combination of the aforementioned duties requiring the same level of skills?

If you answered "No” to #1 or were unable to answer "Yes” to any parts under #2, you may have misclassified the worker as an exempt computer professional.

Outside Sales Employee

To determine whether a worker has been misclassified as an exempt outside sales employee, answer the following :

  1. Is the worker's primary duty making outside sales?
  2. Does he regularly work away from the company's place of business?
  3. Does the worker sell tangible or intangible items, such as goods, insurance, stocks, bonds or real estate, or obtain orders or contracts for services or the use of facilities?

If you answered "No” to any of these questions, you may have misclassified the worker as an exempt outside sales employee.

Can this Executive Summary help you? To decide, consider the cost of misclassifying even ONE employee – in money, time and hassle. Then, consider the benefit of AVOIDING overtime problems, and the value of Exempt or Nonexempt? becomes even clearer.

Table of Contents:book cover
  • Classification Guidelines: Salary vs. Duties tests
  • 10 Common Employer Mistakes
  • 6 Compliance Tips
  • Frequently Asked Questions ... and the answers
  • Self-Audit: Test Your Compliance
Get all this – plus the confidence that comes with knowing the big picture – in Exempt or Nonexempt? How to Make the Call and Avoid FLSA Overtime Lawsuits!

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