Overtime: Who Gets It?Eight Overtime Myths Busted!

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The NFIB Small Business Legal Center is the voice for small business in the courts and the legal resource for small business owners nationwide.

While the information provided in this webinar is intended to be accurate, it should not be considered legal advice. The Legal Center cannot be held responsible for any errors or omissions.

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FLSA – An Overview

• Enacted in 1938• Enforced by the U.S.

Department of Labor• Requires minimum wage• Requires overtime

compensation for hours worked over 40 in a 7-day work week

• Enforces restrictions on child labor

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FLSA – Who is Covered?

Covered Employers• Organization engaged in interstate

commerce; and• Has annual gross income of $500,000

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FLSA – Who is Covered?

Covered Employees• Engaged in interstate commerce, or work

in activities closely related to such work• includes use of e-mail, phones, credit

cards and U.S. mail

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FLSA – Who is Covered?

Independent Contractors• FLSA only covers employees• DOL Economic Realities Test applies not

IRS determination

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FLSA – Exempt v. Non-Exempt

Non-exempt• Must earn at least

minimum wage for all hours worked

• Must keep records• Entitled to overtime for

any hours worked over 40 in 7-day work week at 1½times compensation

• Paid for actual hours worked

Exempt• No limit on the number of

hours an employee may work or be required to work

• No minimum wage requirement

• No overtime requirement• Employees paid

regardless of quantity or quality of work

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Most Common Exemptions

• Executive • Administrative• Professional• Highly Compensated• Outside Sales• Computer Professional• Equity Owner

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Pop QuizWhich employee is exempt?

A. Assistant manager who supervises other employees, but also helps customers

B. A computer programmer who develops your software

C. The director of a 3-person human resource department who makes personnel decisions

D. All of the above

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What’s At Stake?

$18 million – Starbucks

$9 million – Taco Bell

$10 million – Pizza Hut

$90 million – Farmers Insurance

$29.9 million – Radio Shack

$500,000 – Einstein Bros. Bagels

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Increased Enforcement

• Labor Secretary Hilda L. Solis plans to add 250 new field investigators

• Enforcement budget• FY 2007 - $170 million• FY 2008 - $175 million• FY 2009 - $215 million (includes stimulus)• FY 2010 - $227 million (proposed)

Eight Overtime Myths Busted!

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Myth #1: Salaried Employees Are Always Exempt

No. Salaried Employees Must Meet

• Salary Level;

• Salary Basis; and

• Duties Test

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Exempt Employees

Salary Levels Test:• Meet minimum salary amount of at least $23,600

($455 per week)• Those making over $100,000 usually exempt

Salary Basis Test:• Receives predetermined amount each pay period

Duties Test:• Executive, Administrative, or Professional duties

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Highly Compensated Employee

• Paid total annual compensation of >$100,000 (at least $455 weekly salary)

• Customarily and regularly perform one exempt duty

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Myth #2: Occasional Deductions from Exempt Employees’ Salaries are OK

• No. The Salary Basis Test requires a guaranteed salary

• Employee must be paid full salary for week when he performed any work

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Acceptable Deductions

• Personal days• Sickness or disability time under bona fide plan• Suspension for full day or more for disciplinary

reasons under written workplace rules• FMLA leave• Deduction from leave banks

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“Safe Harbor” Corrections

Exemption is not lost if employer policy:• Prohibits improper pay deductions• Contains a complaint procedure• Reimburses employees for improper

deduction• Makes good faith commitment to comply in

future

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Sick Leave Example

Sally, an exempt employee, has the flu and is out for a few days. She has one sick day left to use.

Sally works Monday, goes home early on Tuesday, is absent on Wednesday and Thursday, and comes in for a few hours on Friday to check email and answer messages.

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Sick Leave Example

1: How should Sally be paid?

2: What if she had worked from home on Friday?

3: What if she spent 20 minutes each day checking emails instead of doing it all on Friday?

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Myth #3: Salaried Managers are Exempt

To meet the Executive Exemption, an employee must have actual authority

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Duties Test – Executive Exemption

• Primary duty is management;• Directs the work of 2 or more employees;

and • Authority to hire or fire

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Concurrent Duties

Example: an assistant manager at a retail store may spend time restocking shelves and helping customers

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Myth #4: Employees Who Work Independently are Exempt

• For Administrative Exemption, employee must use discretion and independent judgment

• Look to primary duties and nature of duties

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Duties Test – Administrative Exemption

• Primary duty is performance of office or non-manual work directly related to management or general business operations; and

• Primary duty includes discretion and independent judgment regarding significant matters

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Myth # 5: Professionals are Always Exempt

• Professional Exemption requires knowledge of an advanced type in a field of science or learning customarily acquired by a prolonged course of specialized study; or

• Requires invention, imagination, originality, or talent in a recognized field of creative endeavor

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Myth #6: Outside Sales are AlwaysExempt

• Primary duty is making sales, or obtaining orders or contracts; and

• Customarily and regularly engaged away from employer’s place of business

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Outside Sales – Duties Test

• Sales at customer’s place;

• Do not include sales made by mail, telephone or internet, unless such contact is adjunct to personal calls;

• Employee’s home may be considered the employer’s place of business if used for solicitation of business.

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Myth # 7: Computer Employees are Always Exempt

Computer systems analysts, programmers, software engineers, and other skilled workers in the computer field are exempt.Duties must include:

• Consulting with users to determine hardware, software, or systems functional specifications;

• Design, develop, test, or modify computer systems or programs;

• Design, test, or modify operating systems; or• Combination of any of the above.

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Myth # 8: I won’t get caught.

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Quiz Time

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Quiz Time

Which employee is exempt?A. Assistant manager who supervises other

employees, but also helps customers.B. A computer programmer who develops

your software.C. The director of a 3-person human resource

department who makes personnel decisions.

D. It depends.

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Help is Available!

• NFIB Employment Law Hotline provides NFIB members FREE legal advice.

Call (866) 678-NFIB.

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Help is Available!

• NFIB Guide to Wage and Hour Laws

• Available FREE to NFIB members at www.nfib.com/legal

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Additional Information

• Visit the WHD homepage at: www.wagehour.dol.gov

• Call the WHD toll-free information and helpline at 1-866-4US-WAGE (1-866-487-9243)

• Use the DOL interactive advisor system - ELAWS: www.dol.gov/elaws

• Call or visit the nearest Wage and Hour Division Office

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Thank you!Contact us at: legalcenter@nfib.org