(Last Updated On: September 6, 2022)
By Rodman Employment Law
We all know there’s a minimum wage and that employees are usually paid extra for overtime. But many employees – like corporate managers, internal accountants, and teachers – aren’t paid by the hour and never receive overtime pay. In fact, some of these workers put in so much overtime that their effective pay rate is far below the minimum wage of $14.25 an hour. Is this even legal? Here are three things to know about FLSA Exemptions:
1. Salaried Employees Are Exempt from Minimum Wage and Overtime Laws
In Massachusetts, employers must pay most employees the minimum wage and time-and-a-half for any overtime over 40 hours a week. The law, however, permits employers to pay some employees a salary instead. These are known as “salaried exempt” or just “exempt” employees, because they are exempt from minimum wage laws. Only three types of workers in Massachusetts are eligible to be paid salary: administrative employees, executive employees, and learned professionals.
Massachusetts law looks to the federal Fair Labor Standards Act (FLSA) to determine who fits into each of the three categories.
Under the FLSA, to qualify for any of these exemptions, an employee must be paid at least $684 per week on a “salary basis,” which means that the employee must receive a predetermined amount in each paycheck, which is not subject to reductions because of the quality or quantity of work. Subject to certain exceptions, an exempt employee must receive their full salary for any week in which they perform any work, regardless of the number of days or hours worked. This means that if an employer takes deductions out of an employee’s paycheck, for example, for working fewer hours than usual or for poor performance, the law will not consider it a salary, and the employer must pay at least minimum wage for all hours worked, plus overtime.
2. There Are Three Categories of Exempt Employees Under the FLSA
An employee qualifies for the administrative exemption if all the following are true:
- The employee is paid a salary of at least $684 per week;
- The employee’s primary duty must be non-manual office work related to running either the employer’s business or the business of the employer’s customers; and
- The employee is responsible for exercising their own discretion and judgment regarding significant matters.
The distinguishing factor of the administrative exemption is that the employee’s primary duty must relate to managing or operating the employer’s business. In other words, these employees do administrative work that relates to the running of the business – not the work of the business, itself. Human resources managers and internal accountants, for example, typically fall into this category.
An employee qualifies for the executive exemption if all the following are true:
- The employee is paid a salary of at least $684 per week;
- The employee’s primary duty must be managing the company, or a subdivision of the company;
- The employee must regularly supervise at least two other full-time employees; and
- The employee must either have authority to hire or fire, or the employee’s recommendations about hiring and firing must be given particular weight.
The distinguishing features of the executive exemption are that the employee must have at least two full-time subordinates whom the employee manages, and that the employee must have at least some power in the hiring or firing process. Managers and business owners typically fall into this category.
An employee qualifies for the learned professional exemption if all the following are true:
- The employee is paid a salary of at least $684 per week;
- The employee’s primary duties require advanced intellectual knowledge involving discretion and judgment;
- That advanced knowledge must be in a field of “science or learning;” and
- The employee received advanced knowledge through a long, specialize course of study.
The distinguishing feature of the professional exemption is that it requires advanced knowledge that is usually obtained through specialized education. Teachers, professors, doctors, and lawyers typically qualify for this exemption.
3. The Rules Are Strict and Penalties Severe
If an employer misclassifies an employee as exempt even though the employee does not fit into any of these categories, and pays them a salary basis without overtime, under the Massachusetts Wage Act, the employer will be liable to the employee for three times the unpaid overtime, plus reasonable attorney’s fees and costs.
There are other exceptions to the Massachusetts minimum wage law for non-salaried workers that may also apply, so if you believe you were misclassified and wrongfully denied overtime pay, or if you are an employer facing such a claim or just looking to be sure you are complying with all of Massachusetts’ wage and hour laws, you should get in touch with an experienced Massachusetts employment lawyer as soon as you can. Contact Rodman Employment Law online or call us at 617-850-5250 to speak with an employment law attorney about your situation.
