Between the internet and Law and Order-type television shows, there is no shortage of myths and misconceptions when it comes to the law. However, as an employment attorney, there is one that I hear over and over again and it causes a ton of headaches (and costs a ton of money), especially for small employers. It has to do with employee pay. The typical conversation goes something like this:
Client: Benton, I have an employee who is complaining about working too much and getting paid too little.
Me: OK, tell me a little about this employee.
Client: He’s my assistant. His job is pretty much to do what I tell him, when I tell him.
Me: How many hours a week is he working?
Client: It varies, but anywhere from 35 to 60.
Me: Do you pay him overtime?
Client: No, I don’t need to pay him overtime. He’s on salary.
This is the point in the conversation when I get out of my chair and ring the giant gong in my office. Many employers believe that paying an employee a salary automatically means that the employee does not need to be paid overtime. That is SIMPLY NOT TRUE!
The federal Fair Labor Standards Act (FLSA), among other things, establishes a default rule that employees who work more than 40 hours in a given week must be paid an overtime premium of 1.5 times their regular hourly rate for all hours worked over 40 in a given week. Some classifications of employees, however, are exempt from the FLSA’s overtime provisions. Payment on a salary basis is indeed one of the several criteria that must be met in order for an employee to be classified as exempt, but payment on a salary basis, standing alone, is most definitely not enough to make an employee exempt. Some of the most common exempt classifications are: executives; professionals; administrative employees, and outside sales. For employees to qualify under these classifications, they must meet each of the following criteria, of which salary is but one.
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