Tammy’s Top 10 Q&A’s
Overtime Violations Lurking in Your Company: The Five Most Misclassified Jobs Under the FLSA

  1. Is an exempt employee who moves to part-time hours in the same role but makes less than $684 per week now non-exempt due to failure to meet the salary test?

    Yes, there is no pro-rating of the minimum salary level for exemption.  On the other hand, a part-time employee should not be working overtime hours, and thus no overtime would be due.  If your part-time employees often work overtime, you may have bigger issues if they are not receiving benefits for full-time employees and you are classifying them as part-time for workers’ compensation purposes.

  2. If an exempt employee resigns or terminates mid-week, is the employer required to pay a full week’s salary?

    No, you can pay the employee a proportionate amount of the salary in the first and last weeks of employment.  For example, if the employee starts or terminates mid-week, working only three of five days, you may pay the employee 3/5ths of the salary.

  3. What if an exempt employee meets the other requirements for the executive exemption, but does not directly supervise three full-time employees?

    If an employee does not directly supervise other employees for at least 80 hours a week, the employee does not qualify for the executive exemption.  However, directing the work of other employees, temporary employees or contractors – for example, as a project manager leading a project team – may qualify the employee for the administrative exemption.

  4. How much time must an employee spend exercising discretion and independent judgment to qualify for the Administrative Exemption?

    There is no short or easy answer to this one! The administrative exemption has two requirements: (1) a “primary duty” of performing office or non-manual work directly related to management or general business operations of the employer or the employer’s customers; and (2) that primary duty “includes” the exercise of discretion and independent judgment (DIJ).  The regulations define “primary duty” as the “principle, main, major or most important duty that the employee performs.”  Spending more than 50% of time on exempt duties creates a presumption that the employee meets the primary duty test, but spending less than 50% of time does not defeat the exemption if other factors indicate exempt status.  This is true for the “primary duty” requirement for all of the “white collar” exemptions. However, the DIJ requirement is not the “primary duty” – that is management.  Rather, the primary duty must “include” the exercise of DIJ. Not many courts have noticed this subtle, but important difference.  It means that the employee does not need to be making those important decisions 50% of the time.  Something less should satisfy. It is impossible to give this a percentage, but the less time spent exercising DIJ, the more risk that the employee is misclassified.

  5. Can an employee with a two-year degree who learned the knowledge on the job qualify for the professional exemption?

    Generally, no, a two-year degree will not meet the requirement for the learned professional exemption. There is one, very narrow exception to this rule.  If one or two employees in a job that generally requires a four-year degree have the same level of knowledge and perform the same work as the four-year degreed employees, they may qualify for the learned professional exemption.

  6. If we have IT employees in states without a separate computer exemption, do they have to meet two different tests?

    You must pay employee overtime unless the employee is exempt under both the federal FLSA and state law. Nine states that do have a separate exemption for computer employees:  Colorado, Connecticut, Hawaii, Maine, Minnesota, Nevada, Pennsylvania, Rhode Island, and Vermont.  In these states, the employee will need to meet the requirements for either the executive or the administrative exemption – which is usually similar under both the FLSA and state law, but not always.  In practical effect, every employee always must meet two tests – the federal and the state.

    Our Navigator OT application does this all for you automatically once you choose the state where an employee works – it applies only the available exemptions under federal and state law, and applies both federal and state tests for that exemption.

  7. In today’s environment, we have many sales personnel that make high salaries but do not go out to get contracts. They sell over the phone, internet, etc. and with technology today, they sell locally or internationally. Would these individuals be non-exempt?

    Such employees do not qualify for the “outside” sales exemption, but may qualify for the FLSA section 7(i) exemption, which requires: (1) your company is retail; (2) more than 50% of the employee’s compensation is commissions, and (3) weekly pay is at least 1.5 times the applicable minimum wage. For more information on this exemption, including the definition of “retail”, see the DOL Fact Sheet #20 and DOL’s latest Opinion Letter on 7(i).

  8. Can an employer require outside sales employees to come into the office?

    Yes, but remember, the more time spent in the office the more risk that the employee cannot qualify as “outside” sales.  In addition, because the employee must have a primary duty of making sales, any work unrelated to sales (meetings, training) performed in the office counts against meeting the primary duty test.

  9. With increasing support of technology for virtually any field of work, what does this mean for these exemptions?

    We do see, more and more, employers moving to artificial intelligence and other technologies to make key decisions. Often, the goal in doing so is to ensure standard procedures and improve customer services.  This does affect the administrative exemption by reducing or eliminating the employees’ exercise of discretion and independent judgment.  You should review the application of the administrative exemption after implementation of new technology.

  10. What is the best way to reclassify a job without raising red flags that the job might have been misclassified?

    Reclassification requires careful communication to reclassified employees.  Never admit a legal violation – after all, exempt status of employees is often legally uncertain and changes are a matter of caution.  Communications should focus instead on market-based compensation reviews, changes in the law or job, or corporate changes (merger, reorganization). Focus on the positive – you will now be eligible for overtime.  Avoid the negative – your total compensation will not change, and you may earn more if you work overtime hours.