WHAT’S HOT IN HR

By: Amy Matthews, SPHR

It’s 1938. Franklin Delano Roosevelt is President. America is unionizing, it’s “depressed,” and there’s a New Deal on the table.

Immersed within this monumental piece of legislation was the Fair Labor Standards Act (FLSA). The FLSA introduced some important wage and hour concepts that had not existed before; all of which are still in place today.

The FLSA established the first minimum wage (25 cents per hour) and outlawed child labor. It also established maximum work hours (initially 44 hours per week, later reduced to 40). Additionally, the FLSA outlined the requirements for overtime compensation – which is the beginning of the concept of exempt and non-exempt, and what this article is about.

One of the most misunderstood rules, the FLSA can get employers into the most trouble.

The FLSA predicates whether, by virtue of pay AND job duties, a person is entitled to receive overtime compensation. It sounds simple enough—and it is—when you know the rules. (Disclaimer: not all jobs are governed by the FLSA; some are excluded for a variety of reasons.  If jobs are covered under another federal labor law, FLSA does not apply. For example, railroad workers and truck drivers are covered under the Railway Act and the Motor Carriers Act, respectively, ana are not subject to the FLSA.)

Here are the basics:

The FLSA requires that employees be paid at least the minimum wage for all hours worked, and one- and one-half times their regular rate of pay for any hours over 40 in a week.  Note: Nevada law also requires employers to pay an overtime rate of one- and one-half times the employee’s regular rate of pay if the employee works more than 8 hours in a workday, and the employee’s regular pay rate is less than one- and one-half times Nevada’s minimum wage.

Jobs that are governed by the FLSA are referred to as exempt or non-exempt.  Non-exempt employees are entitled to overtime.  Exempt workers are not (think, exempt from the requirement to pay overtime). To be considered exempt, the employee must meet three tests:

1. Minimum salary threshold (currently $455 per week, but a proposed rule would raise this to $679 per week).
2. Employees must be paid on a salary basis. This means the employee must receive a guaranteed minimum wage each week in which any work is performed)
3. The kind of work performed must meet the guidelines set forth by the duties test.  These duties fall under specific categories and have nothing to do with the job title. The classifications are:
   • Executive
   • Professional
   • Administrative
   • Outside Sales
   • Computer Employee
   • Highly Compensated Employee

As a rule, any manual labor employee (aka “blue collar” work) is non-exempt. Therefore, overtime compensation must be paid.

With updates on the horizon, this is a good time for employers to review their employee classifications—looking at the work being performed, the wage being paid, etc. Failure to correctly classify an employee can be costly.  Having a non-exempt employee incorrectly classified as exempt can mean a lot of back pay (unpaid overtime, payroll tax adjustments, etc.) and a big fine.

We have many options to assist Nevada employers with being compliant with FLSA rules.  We provide an FLSA exemption checklist on our Member Portal to help determine correct classifications for your employees. Please reach out to NAE for assistance with this important area of wage and hour compliance.

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