A Review of The “White Collar” Exemption Criteria
Just this past week I was headed to work in my car listening to a local news radio station. The lead story was the announcement by the current administration that the current salary threshold of $455 per week for overtime eligibility may be increased. This threshold is commonly referred to as the “white collar” exemption. Much to my chagrin the reporter only referred to the salary cap as the deciding factor as to whether or not an employee would be eligible for overtime. Did I hear this correctly? Did the reporter fail his due diligence responsibility and only report one criteria for overtime exemption status?
Here at Helios we have performed many Fair Labor Standards Act (FLSA) audits. All too often we hear from prospective clients “all of our employees are exempt”. While this may be true in some instances, there are certain Department of Labor (DOL) criteria in place that define whether or not a job is exempt (from overtime).
Criteria for Employee Exemption Includes:
- Salary Level – the employee receives a minimum salary level of $455 per week
- Salary Basis – the employee regularly receives a pre-determined amount of pay each pay period and must receive the full amount for any week in which any work is performed
- Job Duties – the factors include:
- Relative importance of the exempt duties
- Amount of time spent performing exempt work
- Relative freedom from direct supervision
- Relationship between the employee’s salary and the wages paid to other employees for the same kind of non-exempt work
As HR professionals we are responsible for performing our due diligence to ensure our employees are classified correctly and paid accordingly. Classification mistakes can be costly to an organization if back pay is awarded due to a DOL Wage and Hour audit.
So what does all of this mean? In the coming months there will be opportunities for all of us to weigh in on this announcement if the administration moves forward with this initiative. Do your homework now and gain an understanding of what this change may mean for your organization.