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Exempt Vs. Non-Exempt Employment: A Look At The Flsa Essay, Research Paper
President Franklin D. Roosevelt enacted the FLSA on June 25, 1938. It was signed in as a federal labor law to provide criteria for governing general labor practices such as overtime, minimum wages, child labor protections and equal pay. The Fair Labor Standards Act is a long and extensive document in and of itself. It defines many exceptions and exemptions. For purposes of this paper the portion of the FLSA that will be concentrated on is the difference between exempt and non-exempt employees.
Let’s begin by defining exempt and non-exempt. Non-exempt employees are those that are paid on an hourly basis and receive overtime compensation at one and one-half times their base pay for all hours worked in excess of some standard threshold. In most cases this “threshold” is 40 hours, but that is not always the case. Dividing the annual salary by 2080 to give a base hourly amount can derive the base pay for most, not all but most, employees. Exempt employees are those that do not receive compensation of any kind for hours worked in excess of whatever the threshold maybe. By definition of law exempt employees must be paid on a salary basis and job duties performed by said employee must be high-level such as executive, administrative or professional. To decide whether an employee meets the criteria for being exempt, there are two tests – the duties test and the salary basis test.
For the salary basis test, employees being paid on a salary basis have a distinct definition. The FLSA defines salary as payment of an equal amount every pay period no matter how many or how few hours are worked, as well as compensation not being subject to reduction on the basis of quantity or quality. By this definition an employee can expect to receive a guaranteed minimum amount of pay each pay period. If an employee works a minimum of one hour during a work period the employee should receive the full amount of the guaranteed minimum payment. The salary basis test is subject to many exceptions and interpretations. An employee, who receives benefits for sick leave that is accrued in some type of benefit plan, for example, is still considered exempt. Employees who do not work at all during a pay period can also have reduced pay, this does not mean they are not on salary but that they performed no work duties. One exact exception is that computer professionals may be paid hourly and still be considered exempt, as long as his/her hourly wage is at least 6.5 times the minimum wage.
The duties test provides standards by which employees can be considered exempt according to the duties they perform. There are three general characteristics that may qualify a person as exempt. The executive exemption applies to those employees who have management duty, direct the work of two or more people, have authority to hire and fire or make decisions that affect the employment status of others, make decisions affecting the business and require a high degree of independent judgement, who are paid a salary that meets FLSA requirements, and do not devote more than 20% of their time to task that are considered to be non-management functions. The administrative exemption applies to those employees who perform non-manual work that is directly related to the policies or general operations of the business of their employer or the employer’s customers, who exercise judgement and discretion in their work, either assist a proprietor or executive, perform specialized or technical work, execute special assignments, who are paid a salary that meets FLSA requirements, and do not devote more than 20% of their time to task that are not described above. The professional exemption is applicable to employees do work requiring advanced knowledge and education, work in an artistic field that is original and creative, work as teachers or computer professionals or similarly skilled professions, perform work that is considered intellectual and varied in character, who are paid a salary that meets FLSA requirements, and do not devote more than 20% of their time to task that are not described above.
Some important cases which may be referenced on this subject are; Boykin v. Boeing, Abshire v. County of Kern, and Martin v. Malcolm Pirnie, Inc. In all three cases the subject at question was whether and employee met the salary basis of exemption. Employers, which were sued, were all accused of deducting employees pay for partial day absences. In another court case the 9th Circuit Court noted that exempt employees are paid for the value of services and not the amount of time they spend performing services.
In concluding this document some things need to be brought to light. The laws governed by the FLSA are very subjective for the most part. One need only read this document to realize that it is by no means that an employer should assume anything about the employment status of a particular employee. This is an issue, which should be taken seriously. When in doubt employers should do an extensive job analysis.
1.) U.S. Government website. Fact sheet No. 017. www.dol.gov/dol/esa/public/regs/compliance/whd/whdfs17.htm.
2.) Winning, Ethan A. Copyright 1999-2000. www.ewin.com/articles/dock.htm.
3.) FLSA Homepage. Chamberlain, Kaufman and Jones; Attorneys at Law. www.flsa.com.
4.) Grossman, Jonathan. www.dol.gov/dol/esa/public/minwage/history.htm.
5.) US Code: Title 29, Section 213. www4.law.cornell.edu/uscode/29/213.text.html.