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July 22, 2014

Salary Levels and Overtime Exemptions Under the Fair Labor Standards Act

Employers who wonder whether they have properly classified their salaried employees as exempt from overtime under the Federal Fair Labor Standards Act (FLSA) would be well advised to consider one simple principle: the higher the employee’s salary, the more likely the employee will be found to be exempt.

The Department of Labor’s (DOL) comments to its FLSA regulations provide: ”employees at higher salaries are more likely to satisfy the requirements for exemption as an executive, administrative or professional employee.” DOL investigators have also admitted to me in wage and hour audits that they will closely scrutinize the duties performed by any salaried employee who makes less than $45,000 annually (even though the FLSA’s annual minimum salary is only $23,660).

This makes sense as a practical matter. The DOL assumes that if an employee is being paid a significant salary, the employee is likely performing exempt work, as the company would not pay a high salary for mindless or menial work. Furthermore, the DOL has less concern that an employee who works a lot of hours is being “taken advantage of” if he is compensated well.

Of course, one has to meet the “duties test” of any exemption. But any company concerned about whether its salaried exempt employees are improperly classified should first look at the amounts of salaries paid. The higher the salary, the less scrutiny there will be on whether the employee satisfies a particular exemption’s “duties test.”

© MICHAEL BEST & FRIEDRICH LLP

About the Author

Mitchell W. Quick Michael Best Friedrich LLP
Partner

Mitch Quick is a partner whose practice includes all aspects of management labor and employment law, with an emphasis on employment discrimination litigation, wrongful discharge, and wage and hour law issues. He has represented large and small manufacturing facilities, dairy cooperatives, hospitals, financial institutions, nursing homes and county and municipal employers. He is co-author of Michael Best & Friedrich’s “Guide to the Fair Labor Standards Act” and editor of the Firm’s “Wage and Hour Question of the Month.”

Mr. Quick's practice...

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