Description: The article refers to the topic on exempt employee. It is the time for Coffee with Kenny talking about exempt and non-exempt employee classification. We can see some differences between exemptions and know three things in order to be an exempt employee.
I’m Kenny Colburn, thanks for joining me for coffee with Kenny, I received a phone call from one of our members the other day and it went something like this, Kenny, we have this salaried employee and I want to know if I interrupted them there and I want to make sure whether they salary to exempt or they are salaried non-exempt.
That led into a long discussion about the differences between exemptions, a lot of people don’t understand this, we talk on a very regular basis to the federal wage in our department and they continually tell us that Mis classification of employees is their first violation in order to be an exempt employee.
Three things must be met, number one, there’s a salary level test, number two, a salary basis test, number three, a job duties test, the salary level test is very simple, the employee must make at least four hundred and fifty five dollars a week now.
You can pay your employees on a weekly, bi-weekly, semi monthly, monthly basis, the law doesn’t care, but it has to average four hundred and fifty thousand dollars a week, the salary basis test is a little more complicated, but what in essence says is that if you quote somebody a salary, they need to make that salary every week that they do any work and with limited exceptions, you can dock their pay.
So if I’d agreed to pay you $800 a week, generally you have to make $800 every week, the job duties test is a lot more complicated, there are several job duties tests we have to look at, there’s the executive test, the administrative professional tests outside sales test in computer tests.
You have to see if one of your employees falls into one of those tests, so if an employee fails that, they have one of the exemptions, therefore, a non-exempt employee, you can pay the non-exempt employee a number of ways.
Most non-exempt employees are paid on an hourly basis, but you can pay a non-exempt employee on a salary basis, you can pay them on a daily basis, you can pay them on an incentive type basis, a piece rate basis.
But here’s the punchline, they always have to receive minimum wage, they always have to receive overtime and you have to track the number of hours they work even if they are a salaried non-exempt employee.
But I decide to pay my switchboard operator $100,000 a year for whatever reason and I tell her that I will never dock her pay and I’m so generous, I decide to call her the vice president of reception.
Let’s look at her under the exemption test, she will certainly pass the salary level test, because she makes more than four hundred and fifty thousand dollars a week, she’ll certainly pass the salary basis test, because I agreed to never dock her pay, but she will fail each one of the executive administrative professional outside sales in computer exemptions.
Therefore, she is a non-exempt employee, for non-exempt employees, you have to keep an accurate record of hours worked, you have to pay minimum wage and you have to pay overtime.
So the bottom line is that if my receptionist works any overtime, I have to pay her at time and a half even though she’s making seventy thousand dollars more than the rate for her job.
She’s got a fancy title, so to a large degree pay entitled have nothing to do with this exemption test, here’s the takeaway from this, there are some jobs that you’re going to have a difficult time figuring out or they are exempt or non-exempt.
So here’s the golden rule, it is always fine to pay an exempt employee like a non-exempt employee, but you are always wrong to pay a non-exempt employee like an exempt employee.
So if you can’t figure out, if they are exempt or non-exempt, you will have that situation occur, take them on a non exempt basis, if you have any questions about this, feel free to call us and ask for me, Elizabeth Brackett or Jennifer Solomon s’en or come to our class of September 29th and we will explain it in greater detail. Thanks.