White Collar Exemptions and Why Job Descriptions are Essential
By Lonnie Giamela Partner, Fisher & Phillips, LLP | February 08, 2015
The Fair Labor Standards Act
As a general rule, the Fair Labor Standards Act ("FLSA") mandates that employees be paid at least the federal minimum wage for all hours worked. It also requires that employees receive overtime pay at time and one-half the regular rate of pay for all hours worked over 40 hours in a workweek. To be an exception to the general rule, or "exempt," the employer must demonstrate that the employee falls into one of the exemptions as defined under the FLSA.
What Are "White Collar" Exemptions?
There are many different types of exemptions. One group is aptly named the "white collar" exemptions. These include the executive, administrative, professional, and outside sales employee exemptions. True to its name, the white collar exemptions do not apply to manual laborers, police officers, paramedics, and other similar public safety personnel. Thus, these exemptions are generally reserved for characters from the hit TV show "Suits," and not from "2 Broke Girls."
This article won't detail the specific requirements for each exemption, but generally speaking, an employer must demonstrate that the employee meets (1) a salary basis test and (2) a duties test. To take advantage of the common, and often misunderstood, administrative exemption under the FLSA, an employee must satisfy the threshold requirement of being paid a minimum of $23,660/yr., or at least $455/week. No exemption is available unless this threshold is met. Employee can be paid hourly or on salary to meet the salary basis test, but the key is that the employee's compensation must be a guaranteed minimum that the employee can count on every week. Employers must take care not to reduce or "dock" an exempt employee's pay for partial day absences or when there is no work available. Any reduction of an exempt employees weekly pay below the $455/week threshold could lead to a loss of the exemption.
The next prong of the administrative exemption is the all-important duties test. Be aware that the employer has the burden to demonstrate that the employee satisfies this prong. Again, job titles are not determinative. Under Federal law, the duties test looks at the employee's "primary" job duties, not necessarily what the employee actually does. As such, a job description is very powerful. On the contrary, under California law, an exempt employee must actually perform exempt duties more than 50% of the time. Regardless, under either test, an employee's job duties will be evaluated very closely to establish how those duties interact with the employer's business and whether they fall within one of the "white collar" exemptions.