I know that in order to classify someone as “exempt” from overtime under the “administrative exemption” that the individual has to be paid a salary of at least $455/week ($23,660 annually). If I pay an employee slightly more than that amount (say $25,000 annually) and believe that the duties performed by the employee otherwise satisfy the “duties test” for the exemption, can I be confident the employee is properly classified as exempt from overtime under the Fair Labor Standards Act (“FLSA”)?
Unfortunately, that confidence is not necessarily warranted. The Department of Labor (“DOL”) takes the position that “the salary paid to an employee is the ‘best single test’ of exempt status.” Consequently, DOL investigators will often focus attention on those employees classified by employers as “salaried exempt” who only make the minimum salary or modestly above it. In practice, DOL investigators will often closely scrutinize an employer’s assertion that an employee performs duties that satisfy a claimed exemption IF the employee’s salary is between $23,660 and $40,000 annually. Conversely, if the employee is being paid a significant salary, DOL investigators will not analyze as rigorously whether the employee’s duties satisfy all stated exemption criteria. In essence, the DOL investigators often take a practical approach of assuming that IF an employer is paying an employee a significant salary, it must be doing so because the employee is performing some significant tasks that likely meet the criteria of a claimed exemption. The lesson then, is a simple one: the more salary an employer pays an employee, the more likely the employee will be found to be exempt under the FLSA.
For more information, please contact Mitchell W. Quick, a partner in Michael Best's Labor and Employment Relations Practice Group at 414.225.2755, or by e-mail at firstname.lastname@example.org.