April 7, 2022 •
Insights into the federal requirements of employee compensation
During busy seasons and in recent times where there have been employment shortages, navigating how to handle overtime has been an issue that many business owners are having to tackle with a fair amount of regularity. There are many twists and turns in the labor laws, so it is imperative that business owners have a working knowledge of how these laws operate in order to minimize risk to their business and treat employees appropriately.
The Fair Labor and Standards Act (FLSA) governs labor and employment issues. The FSLA establishes minimum wage, overtime pay, recordkeeping, and youth employment standards affecting employees in the private sector and in Federal, State, and local governments. Furthermore, covered nonexempt workers are entitled to a minimum wage of not less than $7.25 per hour effective July 24, 2009. Overtime pay at a rate not less than one and one-half times the regular rate of pay is required after 40 hours of work in a workweek.
The general rule is that an employee may work up to forty hours a week for a regular salary. Any work done beyond 40 hours is required to be documented and paid as overtime. However, with any law there are always exceptions and qualifications to the general rule.
An employer is not necessarily required to pay overtime to all its employees. Most overtime laws exclude employees who perform certain, specific types of job duties from the overtime payment requirements. These employees are generally referred to as exempt employees. In addition to exempting certain employees from overtime requirements, some overtime laws exempt employers in specific industries from overtime standards. An exempt employee is an employee that is salaried, which means they are not an hourly wage employee.
Requirements for Exempt Employees
There are three main requirements for exempt employees. These are payment of salary, total earnings, and defined job duties.The salary payment requirement is met when an employer pays the employee on a monthly basis rather than on an hourly wage basis. Secondly, the total earnings of the employee must meet the threshold amount. This amount changes each year, so it is important for employers to be aware of what that amount is in order for the employee to be classified appropriately. For 2021, the threshold amount did not change from 2020; it is $684 per week or $35,568 annually. If the salary falls below these threshold amounts, then the employee is non-exempt. Finally, the defined job duties, in addition to the salary requirement, are usually executive or professional type duties. Exemptions for job duties include the following categories: executive duties, administrative duties, professional duties, computer tech duties such as a computer programmer, highly compensated duties, and outside sales duties.
Employees who are eligible for overtime are referred to as non-exempt employees. Generally speaking, non-exempt employees are hourly wage-earning employees and are guaranteed overtime compensation under the FSLA. Examples of wage earning jobs are interns, freelancers, contractors, servers, retail associates, and anyone who generally takes direction from a supervisor and does not have executive or administrative type job duties.
Importance of Employee Classification
When hiring an employee, the business owner must make sure they are clear about how the employee will be classified. As with any other legal or financial matter, if the employer is uncertain, it is always prudent to reach out to a professional, either an accountant or an attorney, who can advise you on what the laws are and how to proceed with the new hire. Misclassifying employees could lead to both legal and financial troubles that could easily be avoided by asking for assistance.
About Angie Avard Turner
Angie Avard Turner is an attorney who exclusively represents clients in the gift industry including retailers, wholesalers, artists, and bloggers. She is licensed to practice law in the state of Georgia, but she focuses on handling copyright and trademark issues both nationally and internationally. For more information regarding her practice, visit www.angieavardturnerlaw.com.
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