How Does the FLSA Work?

FLSA Information Sheet

10.30.2015

How does the FLSA work?

At its most basic level, the FLSA requires that most employees are paid at least the federal minimum wage ($7.25 an hour) for all hours worked and overtime pay at time and one-half the regular rate of pay for all hours worked over 40 hours in a workweek. Executive, administrative, professional, certain computer employees, and highly compensated employees who meet the legal criteria outlined in the FLSA can be treated by their employer as exempt from both minimum wage and overtime and be paid a set salary of at least $455.00 a week.

Since 1940, the FLSA has required that employees meet a three-part test in order to be considered an executive, administrative and professional (“EAP”) or highly compensated employee (“HCE”), and therefore qualify under the law to be paid a salary and ineligible for overtime. The three part test includes:

Part 1: the employee must be paid a predetermined and fixed salary that is not subject to reduction because of variations in the quality or quantity of work performed (the “salary basis test”);

Part 2: the amount of salary paid must meet a minimum specified amount (the “salary level test”); and

Part 3: the employee’s job duties must primarily involve executive, administrative, or professional duties as defined by the regulations (the “duties test”).

The DOL is not currently recommending any change to Part 1, the “salary basis test,” or Part 3, the “duties test,” although the DOL has asked for comments regarding whether the “duties test” is adequate and easily implemented. As a brief reminder, the duties tests are outlined below.

Since the last FLSA revisions in 2004, the “salary level test” for the EAP exemption has been $455 per week. However, we are confident that the final regulations will change this number.

1. Executive Exemption

An executive exempt employee is one who meets all of the following four criteria:

·  The employee is compensated on a salary basis at a rate of not less than $455 per week;

·  The employee’s primary duty is management of the enterprise in which the employee is employed;

·  The employee customarily and regularly directs the work of two or more other employees; and

·  The employee has the authority to hire or fire other employees or make suggestions and recommendations as to the hiring, firing, advancement, promotion, or any other change of status of other employees which are given particular weight. 29 C.F.R. § 541.100(a)(3)-(4) and NPRM, p. 19.

2. Administrative Exemption

An administrative exempt employee is one who meets all of the following three criteria:

·  The employee is compensated on a salary basis at a rate of not less than $455 per week;

·  The employee’s primary duty is the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer's customers; and

·  The employee’s primary duty includes the exercise of discretion and independent judgment with respect to matters of significance. 29 C.F.R. § 541.200 and NPRM, pp. 19- 20.

3. Professional Exemption

Under regulation29 C.F.R. 541.300, DOL distinguishes between three categories of exempt professional employees: learned professionals, creative professionals, and teaching professionals.

(a) Learned professionals

As29 C.F.R. 541.301notes, the primary duty test for learned professionals includes four elements:

·  The employee is compensated on a salary basis at a rate of not less than $455 per week;

·  The employee must perform work requiring advanced knowledge;

·  The advanced knowledge must be in a field of science or learning; and

·  The advanced knowledge must be customarily acquired by a prolonged course of specialized intellectual instruction.

Simply mandating a two or four-year degree in any subject as a prerequisite for a job will not satisfy the learned professional exemption, according to DOL guidelines. Department of Labor Field Operations Handbook Section 22d02(d) (revised Nov. 29, 2010). Where a job does not require any academic degrees and most or all employees in the particular job lack advanced education and instruction, the learned professional exemption is likely inapplicable. SeeYoung v. Cooper Cameron Corp., 586 F.3d 201 (2d Cir. 2009). The advanced knowledge must be in a field of science or learning. Common fields of science or learning include medicine, law, theology, accounting, actuarial computation, teaching, engineering, architecture, pharmacy, and various types of chemical, physical and biological sciences.

(b) Creative professionals

Unlike learned professionals, creative professionals do not require advanced knowledge to satisfy the creative professional exemption. 29 C.F.R. 541.302(a)notes that "to qualify for the creative professional exemption, an employee's primary duty must be the performance of work requiring invention, imagination, originality, or talent in a recognized field of artistic or creative endeavor as opposed to routine mental, manual, mechanical, or physical work. The exemption does not apply to work which can be produced by a person with general manual or intellectual ability and training."

The creative professional exemption typically includes actors, composers, musicians, soloists, certain painters, writers, novelists, essayists, and cartoonists.

(c) Teaching professionals (No Salary Requirement)

The professional exemption regulations includes a very unique caveat for doctors, lawyers, and teachers, which will not change in the 2015 proposed regulations. The caveat is that the salary requirements (currently $455 per week) do not apply to certain licensed or certified doctors, lawyers, and teachers. 29 C.F.R. §§ 541.303(d); 541.304(d). According to DOL guidance

“Teachers are exempt if their primary duty is teaching, tutoring, instructing or lecturing in the activity of imparting knowledge, and if they are employed and engaged in this activity as a teacher in an educational establishment. Exempt teachers include, but are not limited to, regular academic teachers; kindergarten or nursery school teachers; teachers of gifted or disabled children; teachers of skilled and semi-skilled trades and occupations; teachers engaged in automobile driving instruction; aircraft flight instructors; home economics teachers; and vocal or instrument music teachers. The salary and salary basis requirements do not apply to bona fide teachers. Having a primary duty of teaching, tutoring, instructing or lecturing in the activity of imparting knowledge includes, by its very nature, exercising discretion and judgment.”[1]

Therefore, faculty whose primary duty is teaching will continue to be exempt regardless of salary.

4. Highly Compensated Employees

For individuals who are exempt because they are highly compensated, the current test – adopted in 2004 has two parts. The first is the “salary level test” – $100,000 per year. (As discussed below, the “salary level test” is likely to change.) In addition to making at least $100,000 per year, an HCE must perform “office or non-manual work.” (NPRM, p. 21.) “Non-management production line workers and employees who perform work involving repetitive operations with their hands, physical skill, and energy are not exempt under this section no matter how highly paid.” (Id.)

Common Concerns for Classification in Higher Education

Coaches

Most head coaches will remain exempt under the Executive exemption if they meet the new salary amount. The positions of Assistant Coach and Associate Head Coach are not so simple. Neither were addressed in the 2004 FLSA revisions nor are they addressed in the current proposed 2015 revisions. An August 24, 1998 DOL Opinion Letter, however, analyzes the application of the pre-2004 FLSA exemption regulations to Assistant Coaches and Associate Head Coaches, and concluded that neither an Assistant Coach nor an Associate Head Coach qualified as exempt under either the EAP exemption or the teacher exemption. The DOL concluded that the work of Assistant and Associate Head Coaches are not administrative but rather “hands-on” operations with students, therefore excluding the EAP exemption. The DOL also stated that only 25% of their time was spent teaching, thus excluding the teaching exemption.

Athletic Trainers

Head athletic trainers will likely continue to be exempt under the learned professional exemption. 29 U.S.C. 541.301(8). Specifically, the 2004 regulations state “[a]thletic trainers who have successfully completed four academic years of pre-professional and professional study in a specialized curriculum accredited by the Commission on Accreditation of Allied Health Education Programs and who are certified by the Board of Certification of the National Athletic Trainers Association Board of Certification generally meet the duties requirements for the learned professional exemption.” 29 U.S.C. 541.301(8). If assistant or associate athletic trainers do not have these qualifications, they should be classified as non-exempt.

Education Administrators and Academic Counselors

The exemption for academic administrative employees is contained in 29 C.F.R. § 541.204. This section specifically recognizes the exempt status of employees whose primary duty is to perform “administrative functions directly related to academic instruction or training in an educational establishment or department or subdivision” and who meet the salary tests. 29 C.F.R. § 541.204(a)(2). In order for academic counselors to fit under this exemption they must meet both the salary test (currently $455 a week) and the duties test. Specifically they must perform work that is “directly related to academic instruction or training” which the regulations further define as “work related to the academic operations and functions in a school rather than to administration along the lines of general business operations. Such academic administrative functions include operations directly in the field of education.” The regulations specifically state that “academic counselors who perform work such as administering school testing programs, assisting students with academic problems, and advising students concerning degree requirements” are performing exempt work. 29 C.F.R. § 541.204(c)(1).

Education Administrators and Admissions Counselors

Admission, enrollment, or recruitment counselors are not automatically designated as exempt under the academic administrative exemption, as outlined above, because they are not considered academic personnel. The Preamble to the 2004 regulations specifically stated that, consistent with DOL Opinion Letters issued under the pre-2004 regulations, Admissions Counselors were not included as an example of an exempt academic administrative employee.

According to the April 20, 1999 DOL Opinion Letter noted above, although recruiters are not exempt under the academic administrative exemption, depending upon the employee's duties, they might qualify for the general administrative exemption because their work relates to the school's general business operations and involves work in the nature of general "sales" promotion.

Computer related

In order for an employee to be considered exempt as an administrative employee in a computer related field, both of the following criteria must be met:

·  The employee must be compensated either on a salary or fee basis at a rate not less than $455 per week or, if compensated on an hourly basis, at a rate not less than $27.63 an hour; and

·  Be employed as a computer systems analyst, computer programmer, software engineer or other similarly skilled worker in the computer field performing the primary duties described below:

o  Application of systems analysis techniques and procedures, including consulting with users to determine hardware, software or system functional specifications;

o  Design, development, documentation, analysis, creation, testing or modification of computer systems or programs, including prototypes, based on and related to user or system design specifications;

o  Design, documentation, testing, creation or modification of computer programs related to machine operating systems; or

o  Combination of aforementioned duties, performance of which requires the same level of skills.

The computer employee exemption does not include employees engaged in the manufacture or repair of computer hardware and related equipment. Employees whose work is highly dependent upon, or facilitated by, the use of computers and computer software programs (e.g., engineers, drafters and others skilled in computer-aided design software), but who are not primarily engaged in computer systems analysis and programming or other similarly skilled computer-related occupations identified in the primary duties test described above, are also not exempt under the computer employee exemption.[2]

Finally, as has been the case under the proposed revised regulations, an employer is not required to treat any employee as exempt. Employers are currently able to treat all employees as non-exempt and can continue to do so in the future.

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Last updated October 30, 2015

[1] http://www.dol.gov/whd/overtime/fs17d_professional.pdf

[2] http://www.dol.gov/whd/overtime/fs17e_computer.htm. For a thorough analysis of the case law, opinion letters, and other guidance under this unique exemption see http://theemplawyerologist.com/2013/12/26/what-you-may-have-to-pay-your-it-employees-overtime/.