The Chicago Employment Law Blog

Myth Busted: Are Salaried Workers Entitled to Overtime Pay?

Many are familiar with the common abuse of the salaried employee” He works a ninety-hour week while making $40,000 per year. Because he does not log his hours, it is assumed that he is not entitled to overtime pay and is therefore without recourse when the boss forces him to work double the hours of the ordinary forty-hour week.

The assumption, it seems, was wrong. Kinda.

The Federal Fair Labor Standards Act sets the general rules and restrictions for employee pay and overtime rules. It applies to all employees, except the exempt, and sets the standard forty hour work week, minimum wage, and overtime pay rules. The problem is, the FLSA rules provide so many exceptions that the rule itself (pardon the cliché) is Swiss cheese.

The standard hourly-wage earners, such as a manual laborer or "blue collar" worker, are likely covered. On the other hand, some salaried employees are not, and can therefore be abused legally. In order to be exempt from FLSA, an employee must either be explicitly listed in the statute (such as outside sales employees and many agricultural workers) or meet the following qualifications:

Pay Rate

To be exempt, an employee must be paid more than $23,600 per year. High wage employees making more than $100,000 are almost always exempt.

Salaried

Employees must also be paid on a salaried basis. This is not as simple as it sounds, as there must be a minimum guaranteed base salary. The determination is made on a case-by-case basis, but in simplest terms, there must be a guaranteed paycheck, regardless of the amount of work produced.

If a person is paid a base salary plus bonuses, they can still be exempt. However, if they are paid on a weekly basis but aren't paid when the plant is closed or production slows down, that position is probably not exempt from overtime rules.

"Exempt" Job Duties

This is the most convoluted requirement. Executives, professionals, and administrators are exempt from overtime requirements.

Executives must supervise two or more employees, have management as their primary duty, and have some genuine input into the job status of other employees, such as hiring or firing.

Professionals aren't simply people in suits. These are the "learned professions," such as doctors, lawyers, and teachers. While Registered Nurses are exempt, LPNs are not.

Administrators are even more complicated. The FLSA definition describes their duties as "directly related to management or general business operations ... which involves the exercise of independent judgment and discretion about matters of significance." Useless, right?

These are the overseers of the production grunts. In the blogosphere for example, the editors would be the administrators (and therefore exempt) while the bloggers would be the producers who might be non-exempt.

What's the take away? If you are earning an hourly wage, you probably are entitled to overtime. If you are making six figures, you are probably not. If you are a salaried employee somewhere in between the two, and you feel you are not being paid properly, we'd recommend consulting an (exempt) attorney.

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