Practice Areas

Some of Your Salaried Employees May Be Entitled to Overtime Pay

Many employers mistakenly believe that overtime pay only applies to hourly workers.  The reality is that many salaried employees are also entitled to overtime pay.

Generally speaking, unless employees are considered “exempt,” the law requires that any hours worked in excess of 40 per workweek be compensated at a rate of not less than time and one-half of their regular rate of pay.  This holds true for employees who receive a salary, provided that they do not fall within one of the available exemptions. The exemptions are defined by federal and state law, and while they apply generally to white-collar workers whose primary functions are executive, administrative, professional, or in other narrowly-defined categories, the standards under federal and state law are not always the same, with the latter usually being stricter.

Two of the most relied-upon exemptions are the administrative and executive exemptions.  The requirements for these two exemptions, detailed below, include the requirements under both federal and New York state law.

The Executive Exemption

  • The employee must be compensated with a salary that is greater than or equal to $600.00 per week;
  • The employee’s primary duty must be managing the business/organization, or managing a particular department or other subdivision of the business/organization;
  • The employee customarily and regularly direct the work of at least two other full-time employees (or the equivalent);
  • The employee’s suggestions and recommendations as to the hiring, firing, advancement, promotion, or any other change of status of other employees have particular weight; and
  • The employee customarily and regularly exercises discretionary powers.

The Administrative Exemption

  • The employee must be compensated with a salary that is greater than or equal to $600.00 per week;
  • The primary duties of the employee must be office or other non-manual work that relates directly to management or business operations, either to the employer or the employer’s customers/clients;
  • The employee’s primary duties include the exercise of discretion and independent judgment to matters that are significant to the operation of the business/organization; and
  • The employee regularly and directly assists an employer or an employee employed in a bona fide executive or administrative capacity; or performs, under only general supervision, work along specialized or technical lines requiring special training, experience or knowledge.

Although these two exemptions are two of the most popular exemptions, the requirements present real hurdles to employers looking to claim these exemptions.  Employees who are not properly exempt, even when paid a salary, will be entitled to overtime wages for hours worked over 40 in a workweek.

With wage-and-hour litigation and investigations still at a high, employers should confirm that they are correctly classifying (and paying) their salaried employees.  This is particularly important when it comes to salaried employees because damage awards have a tendency to skyrocket based on the inherent circumstances of claims involving salaried employees.  Any damage award will be based off of the salary and, for that reason, will result in a higher rate of pay.  In addition, most employers do not keep a record of hours worked by their (properly or improperly classified) salaried employees.  That fact alone won’t preclude a damage award.  Rather, in the absence of records, it’s highly likely that a damage calculation will be based on the employee’s typically inflated recollection of hours worked.