White-Collar Overtime Exemptions Under the FLSA
Written by Complete Payroll
What is a White-Collar Overtime Exemption?
Not all positions are covered by the minimum wage, overtime, and certain recordkeeping requirements under the FLSA. These positions, known as “exempt,” include executive, administrative, professional, outside sales, or some computer-related jobs.
It’s important to keep in mind that all positions are automatically classified as “nonexempt.” This means that to have an exempt status, as the employer, you must actively classify those positions as exempt from being released from overtime requirements.
Whether or not you are “exempt” from overtime depends on three different criteria:
- The employee’s primary duty
- If the employee is paid on a salary basis (though some exemptions to this exist)
- The employee has a minimum salary of $684 a week or $35,568 (some exemptions exist here as well)
Some states may also have their own set of exemptions that you will need to consider to ensure you’re in compliance.
If an employee is in an exempt position, they can be scheduled to work any number of hours in a workweek without being paid overtime. Some states have their own requirements when it comes to work breaks or mandatory days of rest, so make sure you know if your state has any of these regulations.
Deductions and Record Keeping
Even if employees work less than a regular workweek, their salary is subject to limited deductions due to their exempt status.
Additionally, while FLSA requires specific record keeping of hours worked for nonexempt employees, it does not require the same for exempt employees. However, make sure your state doesn’t have requirements of its own with which you will need to ensure you’re in compliance.
Common Mistakes with Exempt Positions
Many employers make common mistakes regarding different aspects of exempt employee positions. Below are some of the most common so you can avoid them:
One big (and costly) mistake that happens frequently is that a nonexempt position is classified as exempt. This can result in lawsuits for back wages owed for overtime from which they weren’t exempt.
Making inaccurate deductions not only affects the employee in question but can also negatively affect anyone with exempt status in your business. Additionally, make sure you are not making deductions for hours not worked, as exempt employees aren’t governed by the same deductions as nonexempt employees when it comes to that. Not complying with absence policies or not following their specific schedule should be a disciplinary issue.
3. Paid Time Off
An employee’s paid time off can be deducted from their time banks in any increment, but any deduction from their paycheck cannot be made in increments less than a full day should they not have PTO to cover their day off.
4. Closed Days
If your company closes for holidays or inclement weather, exempt employees cannot be deducted for that time on their paycheck unless it is a whole week and they did not work from home during your closed period.
Not Keeping Records
Lawsuits against companies for a misclassified exemption status are common. Though recordkeeping laws are not as stringent for exempt employees, if you find yourself in one of these lawsuits, accurate records are your best bet when it comes to not paying dearly. Consider keeping records of salary history and any records that justify their exemption status if you find yourself in this position.
Looking for more guidance as tax time draws near? Complete Payroll has you covered. Visit our blog for more articles like these to guide you through the ins and outs of everything related to HR and payroll.