Can I Pay My Employee A Salary?

Not all employees can be paid a salary. The Fair Labor Standards Act (“FLSA”) provides different standards for exempt (salaried) employees versus non-exempt employees.

Non-Exempt Employees

These employees are covered by FLSA. They are NOT exempt from FLSA’s requirements concerning minimum wage and overtime. As such, non-exempt employees must be paid at least federal minimum wage and overtime (time and a half the regular rate of pay for all hours worked over 40 each workweek).

Exempt (Salaried) Employees

Salaried employees are exempt from FLSA’s minimum wage and overtime requirements. Although these employees do not have to be paid federal minimum wage nor do they qualify for overtime pay, under FLSA, there are certain requirements an employee must meet to qualify as “exempt”.  To qualify for an exemption, the employee must be paid on a salary basis of at least $455 per week and must meet certain tests with respect to their job duties. It is important to note that it is the employee’s job duties, not their job titles, that determine whether the employee is exempt. FLSA recognizes the following exemption categories:

  • Executive Exemption. The employee’s primary duty is to manage the enterprise or manage a customarily recognized department or subdivision of the enterprise. The employee must regularly direct the work of at least 2 or more full-time employees. Also, the employee must have the authority to hire or fire other employees or have the authority to recommend hiring and firing.
  • Administrative Exemption. The employee’s primary duty is to perform office or non-manual work directly related to the management or general business operations of the employer. Primary duties also include exercising discretion and independent judgment with respect to matters of significance.
  • Professional Exemption. The employee’s primary duty is to perform work requiring advanced knowledge, defined as work which is predominantly intellectual in character and which includes work requiring the consistent exercise of discretion and judgment in the field of science or learning.
  • Computer Employee Exemption. These employees can be paid on a salary basis or at an hourly rate of at least $27.63 per hour. The employee must be employed as a computer systems analyst, computer programmer, software engineer, or other similarly skilled worker in the computer field performing certain primary duties.
  • Outside Sales Exemption. These employees must regularly work outside of the employer’s place(s) of business. Their primary duties must include making sales or obtaining orders or contracts for services or for the use of facilities for which a consideration will be paid by the client or customer.
  • Highly Compensated Employees. These employees make an annual salary of $100,000 or more and can be exempt under the executive, administrative or professional exemption.

Employees considered “blue collar” (manual labor) workers cannot be exempt under FLSA. Employees such as police officers, detectives, fire fighters, paramedics, and other first responders also cannot be exempt under FLSA.

What Does This Mean For Employers?

Employers should take extreme caution when classifying an employee as exempt (salaried) or non-exempt. Misclassifying an employee as exempt may result in the employer having to pay fines, back wages, overtime, other damages to include liquidated damages, and attorney’s fees and costs.