Have you heard of the Fair Labor Standards Act of 1938 (FLSA)? It's a federal law that provides many protections and benefits to workers, particularly regarding minimum wage and overtime requirements. It also set forth laws about business recordkeeping and youth employment standards. To enforce this law, all employers must categorize and report their employees in specific ways. This way, the U.S. Department of Labor can ensure that each business pays its employees appropriately for example, and take legal action if they are not.
The passing of the FLSA was a landmark legislative decision that gave employees many of the wage protections they have today. This includes the ability to take legal action against employers who try to avoid adhering to the law. Since then, there have been modifications to it to better fit the needs of modern employers and employees. This has led to a distinction between workers: those who are exempt from many of the FLSA rules and those who are not.
But what does it mean to be an exempt employee vs. a non-exempt one? The employment law attorneys of Barrett & Farahany can explain.
What is an Exempt Employee?
An exempt employee refers to someone exempt from the rules and regulations of the FLSA. This does not mean that they are exempt from other employment legislation, such as the Family Medical Leave Act.
Who Can be an Exempt Employee?
To be an exempt employee, you have to have an administrative, professional, executive, computer, or outside sales role in your company. This typically means that you have more freedom than a customer-facing position or someone in a factory, for example. Many of these types of roles are leadership positions where the individual has significant bargaining power to control their own salary, the business's budget, and the employment of those below them on the company's hierarchy.
What Does it Mean That An Employee is Exempt?
When an employee is exempt from FLSA, this means their employer does not have to give them the benefits the FLSA offers to employees. Since this is usually only for employees on the higher end of leadership, the minimum wage laws rarely apply. The exempt employee likely receives far more money than overtime rates would offer, often for the usual 40 hours of work or less.
Instead, they tend to receive other benefits from their employers to incentivize working extra hours, likely because their salary is already so promising that overtime wages aren't enough to convince them to work more than their usual hours.
Exempt employees still must be recorded and meet age requirements. They are not exempt from those facets of the FLSA, so no business should forget or choose not to record and report an exempt employee.
What is a Non-Exempt Employee?
Most employees are non-exempt, as in they are covered and protected by the FLSA. Their wages must meet the standard minimum wage, they must receive overtime pay, and they must meet all age requirements.
Overtime wages are the added rate people are paid when they work beyond their typically 40-hour work week. Many salaried positions don't meet the qualifications to be exempt from FLSA, so you can still have salaried employees who receive overtime pay.
What are the Consequences of Wrongful Employee Classification?
Many employers have tried to misclassify their employees as exempt so that they can avoid paying them overtime wages. If an employer is caught doing this, they are met with regulatory action from the DOL, fines, penalties, costs to remedy the misclassification, and employee lawsuits.
What are the Signs that You are a Misclassified Employee?
It's always a good idea to communicate with your fellow employees. If your employer tries to tell you that you are not to discuss your wages and/or salary with each other, that is illegal. Knowing how much your fellow employees – or employees working for competitors – are making is important to making sure you are being paid what you're owed.
If others are making more than you, then it is possible that your employer is not paying you the wages they should be.
You can also use your paycheck and some basic math to see if you're being paid overtime correctly. Overtime has to be at least 1.5x more than your usual hourly rate. After you calculate what came from your regular work hours, take your average hourly pay rate, multiply it by 1.5, and then multiply it by the hours you worked. If what you've been paid is not within the margin of error to account for taxes and government fees, you may be underpaid.
What Should You Do if You Are Being Misclassified as an Exempt Employee?
The first thing you want to do is take any records you have of your pay, the pay your employees receive, and/or any other financial document about payment, and then bring it to our attorneys. We can look through it to see if we can find proof of misclassification and/or wage theft of any kind.
You can trust the attorneys at Barrett & Farahany to empathize with your situation. We have experience with many people who have been through similar ordeals, and we do our best to help them. In our experience, the best help comes from those with the ability to explain complex legal concepts so that you understand how and why you have become a victim of your employer, and how you can get damages.
For more information, contact the attorneys at Barrett & Farahany today.