Are You Correctly Classifying Employees as Exempt From Overtime? If not, it Could Cost You.

Diana Plue, Esq., Sheats & Bailey, PLLC

Both the NY Minimum Wage Act and Fair Labor Standard Act, (“FLSA”), requires employers to

pay employees overtime (OT) at the rate of 1 1/2 times their regular rate of pay if they work over 40 hours in a week, unless said employee is exempt from overtime. When is an employee exempt from being paid OT? Only administrative, executive, professional and computer employees who pass a salary basis test and salary level test are exempt from OT. Here is how the administrative, executive, professional and computer employees are defined.

Executive: To qualify for the executive employee exception, the employee must perform the following duties:

  • The employee’s primary duty is the management of the enterprise.
  • Customarily and regularly directs the work of two or more employees.
  • The authority to hire or fire other
  • The employee’s recommendations as to the hiring, firing, advancement, promotion of other employees have particular weight.
  • Customarily and regularly exercises discretionary powers.
  • The employee is paid a weekly salary at the NYS minimum salary level identified below.

Administrative: Employees must perform the following duties:

  • The employee’s primary duty consists of the performance of office or non-manual field work directly related to management policies or general operations.
  • Customarily and regularly exercises discretion and independent judgment.
  • Regularly and directly assists an employer or another employee employed in a bona fide executive or administrative capacity.
  • The employee is paid a weekly salary at the NYS minimum salary level identified below.

Professional Employee: To qualify for this exemption, the employees must perform the following duties:

  • The employee’s  primary  duty  consists  of  the

performance of work that:

  • Requires knowledge of an advanced type in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction and study, OR
  • Is original and creative in a recognized field of artistic endeavor and produces a result that depends primarily on the invention, imagination or talent of the employee.
  • The consistent exercise of discretion and
  • Is predominately intellectual and varied in character as opposed to routine work.
  • Is of such character that the output produced cannot be standardized.
  • No minimum salary level is required under NYS law; therefore, the Federal salary level of $684.00/wk.

Computer Employee: NY follows the FLSA requirements for the computer employee exemption. FLSA state a computer employee is exempt if paid a minimum salary of $684.00/wk. and has a primary duty that consists of:

  • Applying system analysis procedures to determine system specifications, OR
  • Designing, developing, creating, or testing computer systems or programs related to user or system design specifications and/or machine operating systems.
  • Generally, a help desk employee does not meet the qualifications for the computer employee exemption.

If your employees fit in one of the above exemptions, you must then determine if they pass each of the two tests below.

Salary Basis Test: The employee is paid a predetermined amount each week. The

amount of pay may not be reduced based on a variation in the quality of work or number of hours worked.

Salary Level Test: It requires employees to be paid a minimum statutory defined salary to be considered exempt from OT. FLSA requires a minimum weekly wage of $684.00/wk., whereas NYS requires a minimum weekly wage of

$1,125.00/wk. if located in NYC, Nassau, Suffolk  and  Westchester  Counties  and

$990.00/wk. for the rest of NYS.

Failure to pay OT is wage theft under NYS’ Wage Theft Act. Penalties for withholding OT pay can include double the amount that should have been paid in OT wages and up to triple the amount if found a willful violation, plus interest, attorney fees and up to a $20,000.00 fine. In addition, officers of the employer who knowingly allow nonpayment of OT due an employee will be guilty of a misdemeanor for the first offense and a felony for a second offense within six years.

Employers should review all employees identified as exempt to ensure employees have not been misclassified. Common exemption problems encountered by employers include a) labeling all salaried employees as exempt without regard to the actual work duties performed and salary paid; b) professional employees who exclusively perform unprofessional work, unrelated to their degree;

  1. c) docking salaried workers for missed time. Misclassifying employees as exempt can be a costly mistake.

For more additional information or assistance contact Diana Plue at Sheats & Bailey, PLLC, Tel: (315) 676-7314.

The information provided in this article is not intended to serve as specific legal advice for any particular situation. Competent legal and experienced counsel should be consulted.