(Last Updated On: November 15, 2024)
For all employers in Natick and Boston, it is essential to accurately identify non-exempt and exempt employees for purposes of minimum wage and overtime under the federal Fair Labor Standards Act (FLSA). Employees who are “exempt” are not entitled to receive overtime pay under the FLSA. Employers often want to be able to classify employees as “exempt” because it can mean that they are not responsible for paying these employees overtime regardless of the number of hours they work in a given workweek. However, employers can also face serious consequences if they misclassify an employee and fail to pay overtime when it is owed. In those circumstances, the employer can face an unpaid wages or overtime claim.
In order for an employee to be classified appropriately as an “exempt” employee, there are three “tests” that the employee must pass. One of those tests concerns the employee’s type of job. Our Natick employment law attorneys can explain in more detail, and we can answer any questions you might have about the employees who are currently employed at your business in Massachusetts.
Three “Tests” for Exempt Employees Under the FLSA
There are three tests that an employee must pass in order for an employer to consider them exempt. The tests are not something the employee sits down to take, to be clear — rather, the tests are essentially questions the employer must answer about the employee. Depending on the answers, the employee will be classified either as non-exempt or exempt. The three tests are:
- Duties Test;
- Salary Basis Test; and
- Salary Level Test.
The employee must pass all three tests to be exempt. With the duties test, the employee must be employed in a particular type of profession with particular professional duties outlined by the FLSA. We will provide you with more information about these categories below. Then, if the employee passes this first test (i.e., has one of the types of jobs with the duties identified by the FLSA to make that employee exempt), then the employer will need to ensure the employee also passes the salary basis and salary level tests. You will only need to consider the salary basis and salary level tests if you have an employee who meets the duties test.
For the salary basis test, the employee must be paid on a salaried basis. While not all salaried employees are exempt (as we will explain monetarily), being salaried is a prerequisite for an employee to be exempt. In other words, an hourly-wage employee is a non-exempt employee.
Then, the salary level test asks how much money the employee earns in their salary. The employer only needs to move onto the salary level test if the employee is a salaried employee (and therefore meets the salary basis test). The salary levels recently changed in July 2024 and will change again in mid-2025. As of July 1, 2024, for an employee to be exempt, they must earn at least $43,880 per year or $844 per week. That salary threshold will rise to $58,656 annually or $1,128 per week. Every three years after that, the US Department of Labor (DOL) will increase the salary threshold.
Duties Test and the Bona Fide Executive, Administrative, Professional, and Outside Sales Exemptions
To pass the duties test, an employee must fall into one of the job categories identified by the FLSA (with limited exceptions or outliers). Generally speaking, in order for an employee to be considered exempt under the duties test, they must have one of the following types of jobs:
- Executive, which involves management, directing the work of other employees, and having input in decisions to fire or hire or the authority to do so;
- Administrative, which involves office work and exercising discretion and independent judgment at work;
- Professional, which must involve performing work that requires advanced knowledge and is in a field of science or learning, or invention and imagination (for a “creative professional” exemption);
- Computer employee, which involves duties associated with work as a computer systems analyst, programmer, software engineer, or similar; or
- Outside sales, which involves making sales or obtaining contracts and primarily doing the work away from an employer’s place of business.
There are more specific elements of each type of profession, so you should discuss details with an employment law attorney.
Contact a Boston Employment Law Attorney
If your business has any questions or concerns about classifying employees as non-exempt or exempt and whether or not you are required to meet minimum wage requirements and pay overtime wages, it is important to seek legal help. Or, if you have an employee who has raised concerns about unpaid overtime or unpaid wages, it is time to seek legal advice. One of the experienced Boston employment lawyers at our firm can speak with you today. Contact Rodman Employment Law to ask any questions you have and to learn more about the services we provide to employers in Massachusetts.
