Salaried Employees Never Get Overtime...Right?

By Mario Hernandez, Legal Counsel to Commissioner Aaron Demerson

Some employers are under the impression that overtime pay is not required if an employee is being paid on a salary basis. However, that is not always the case. Anyone can be paid on a salary basis. However, whether an employer is responsible for minimum wage and/or overtime is dependent on whether the employee is considered ?exempt? or ?non-exempt.?

Exempt Employees

Exempt employees are those that are exempt from one or more of the provisions of the Fair Labor Standards Act (FLSA), namely minimum wage and/or overtime. While there are various types of exempt employees, the focus of this article will be the ?white-collar? exempt employees.

White-Collar Exemptions

Executive, administrative, professional, computer professional, and outside sales representative employees are all examples of white-collar exempt employees (see:? ?https://twc.texas.gov/news/efte/exemptions_from_minimum_wage_and_overtime.html). In order for one of the white-collar exemptions to apply to an employee, two tests must be satisfied: a salary test and a duties test.

Salary Test

In order to satisfy the salary test, an employee needs to be paid on a salary basis at a rate not less than $684 per week. For more information about the salary basis requirement please visit ?Fact Sheet #17G: Salary Basis Requirement and the Part 541 Exemptions Under the Fair Labor Standards Act (FLSA)? at the following link: https://www.dol.gov/sites/dolgov/files/WHD/legacy/files/fs17g_salary.pdf.

Duties Test

To satisfy the duties test, the primary duty of an employee must be that which is required by the exemption being claimed. For example, if an employer claims that an employee is exempt under the executive exemption, the employee must have the primary duty that is required for the executive exemption. In sum, job titles alone will not be enough. You can find information about the duties test and the primary duties that correspond with their respective exemptions at the following link: https://www.dol.gov/sites/dolgov/files/WHD/legacy/files/fs17a_overview.pdf.

Are There More Exemptions?

The answer is yes! There are more exemptions beyond the white-collar exemptions. Some exemptions only apply to overtime, while some only apply to minimum wage, while still others apply to both. For more information about exemptions under the FLSA, please visit the following link:? https://twc.texas.gov/news/efte/exempt_non_exempt_status_under_the_flsa.html.

Non-Exempt Employees

If an employee does not meet the requirements to be an exempt employee (white-collar exemptions or otherwise) then the employee is non-exempt. Non-exempt employees are entitled to minimum wage and overtime. This is the case even if the employee is paid on a salary basis. For example, for purposes of the white-collar exemptions, if an employee satisfies the salary test, but not the duties test, the employee is non-exempt (assuming, of course, that the employee is not covered by some other exemption). For more information about non-exempt salaried employees specifically, please visit the following link: https://twc.texas.gov/news/efte/h_regular_rate_salaried_nx.html.

Conclusion

An employer?s obligation to pay overtime is not always extinguished by paying an employee on a salary basis. Indeed, to be an exempt employee, an employee needs to fit into an exemption. If no exemption fits, the employee is non-exempt and the employee is entitled to minimum wage and overtime. In sum, knowing the differences between exempt and non-exempt status under the FLSA can assist employers in paying employees properly.