Overview of Law Regarding Employees Misclassified as Exempt from Overtime:

Under the federal Fair Labor Standards Act (“FLSA”) some employees are “exempt” from receiving (or, in other words, are not entitled to) overtime pay.

However, unless you qualify for one of the overtime exemptions, it is likely your employer should be paying you one and one-half times your regular rate of pay for any hours you work in excess of forty hours per workweek. If you work more than forty hours per workweek but do not receive overtime pay, and you do not qualify for any of the following exemptions, you may be misclassified and could be entitled to up to three years of unpaid overtime, plus additional compensation.

A. Executive Exemption

To qualify for the FLSA’s executive exemption, you must meet all four parts of the following test:

  • You must be compensated on a salary basis at a rate not less than $455 per week.
  • Your primary duty must be managing the enterprise, or managing a customarily recognized department or subdivision of the enterprise.
  • You must customarily and regularly direct the work of at least two or more full-time employees or their equivalent.
  • You must have authority to hire or fire other employees, or your suggestions and recommendations as to hiring, firing, advancement, promotion or any other change of status of other employees must be given particular weight.
  • Employers often misclassify workers as exempt under the executive exemption who may manage another employee, but do not manage at least 80 labor hours worked by other employees each week (or the equivalent of two full time employees or four part-time (20 hour per week) employees.

If your employer has classified you as exempt from the FLSA’s overtime requirement under the executive exemption, but you do not meet all four requirements above, you may be misclassified and could be entitled to up to three years of unpaid overtime, plus additional compensation.

B. Administrative Exemption

To qualify for the FLSA’s administrative exemption, you must meet all three parts of the following test:

  • You must be compensated on a salary basis at a rate not less than $455 per week.
  • Your primary duty must be the performance of office or non-manual work directly related to the management or general business operations of your employer or your employer’s customers.
  • Your primary duty must include the exercise of discretion and independent judgment with respect to matters of significance.
  • Employers often misclassify workers as exempt under the administrative exemption who may be doing office-type work, but those responsibilities are not necessarily related to managing the business or are not related to the company’s business operations. These employees typically are not exempt under the administrative exemption. Moreover, if an employee’s primary duty is sales, the law provides that they generally are not exempt under the administrative exemption.

If your employer has classified you as exempt from the FLSA’s overtime requirement under the administrative exemption, but you do not meet all three requirements above, you may be misclassified and could be entitled to up to three years of unpaid overtime, plus additional compensation.

C. Professional Exemption

There are two types of professional exemptions under the FLSA: (1) the learned professional exemption; and (2) the creative professional exemption.

To qualify for the FLSA’s learned professional exemption, you must meet all four parts of the following test:

  • You must be compensated on a salary basis at a rate not less than $455 per week.
  • Your primary duty must be the performance of work requiring advanced knowledge, defined as work which is predominately intellectual in character and which includes work requiring the consistent exercise of discretion and judgment.
  • The advanced knowledge must be in a field of science or learning.
  • The advanced knowledge must be customarily acquired by a prolonged course of specialized intellectual instruction.
  • If your employer has classified you as exempt from the FLSA’s overtime requirement under the learned professional exemption, but you do not meet all four requirements above, you may be misclassified and could be entitled to up to three years of unpaid overtime, plus additional compensation.

To qualify for the FLSA’s creative professional exemption, you must meet both parts of the following test:

  • You must be compensated on a salary basis at a rate not less than $455 per week.
  • Your primary duty must be the performance of work requiring invention, imagination, originality or talent in a recognized field of artistic or creative endeavor.
  • If your employer has classified you as exempt from the FLSA’s overtime requirement under the creative professional exemption, but you do not meet both requirements above, you may be misclassified and could be entitled to up to three years of unpaid overtime, plus additional compensation.

D. Highly Compensated Employees

If you perform office or non-manual work and you are paid a total annual compensation of $100,000 or more, which must include at least $455 per week, you may be exempt from the FLSA’s overtime requirements if you customarily and regularly perform at least one of the duties of an exempt executive, administrative or professional employee, discussed above.

E. Computer Related Exemption

To qualify for the FLSA’s computer related exemption, you must meet all three parts of the following test:

  • You must be compensated on a salary basis at a rate not less than $455 per week or be compensated on an hourly basis at a rate not less than $27.63 an hour.
  • You must be employed as a computer systems analyst, computer programmer, software engineer, or other similarly skilled worker in the computer field.
  • Your primary duty must consist of at least one of the following: (1) the application of systems analysis techniques and procedures, including consulting with users, to determine hardware, software or system functional specifications; (2) the design, development, documentation, analysis, creation, testing or modification of computer systems or programs, including prototypes, based on and related to user or system design specifications; (3) the design, documentation, testing, creation or modification of computer programs related to machine operating systems; or (4) a combination of the aforementioned duties.
  • Employers often misclassify employees engaged in the manufacture or repair of computer hardware and related equipment, or in help desk positions, as exempt. If you are engaged in these activities, and you do not otherwise qualify for a different FLSA exemption, you may be eligible for overtime pay.

If your employer has classified you as exempt from the FLSA’s overtime requirement under a computer related exemption, but you do not meet all three requirements above, you may be misclassified and could be entitled to up to three years of unpaid overtime, plus additional compensation.

F. Outside Sales Exemption

In order to qualify for the FLSA’s outside sales exemption, you must meet both parts of the following test:

  • Your primary duty must be making sales or obtaining orders or contracts for services.
  • You must be customarily and regularly engaged away from your employer’s place of business.
  • Unlike many other FLSA exemptions, you need not be paid a certain amount per week to qualify for the outside sales exemption.

Employers often misclassify employees as exempt from overtime pay under the outside sales exemption. They might pay these sales persons on a commissions basis, or a salary plus commissions basis and not pay them any overtime pay for their overtime hours worked (and at times, may deny them minimum wages for each workweek worked). If you are a salesperson who is primarily making sales from inside of the office, it is likely you do not fall under the outside sales exemption to the overtime laws.

If your employer has classified you as exempt from the FLSA’s overtime requirement under the outside sales exemption, but you do not meet both requirements above, you may be misclassified and could be entitled to up to three years of unpaid overtime, plus additional compensation.

G. Retail or Service Establishment Exemption

In order to qualify for the FLSA’s retail or service establishment exemption, you must meet all three parts of the following test:

  • You must be employed by a retail or service establishment. Retail and service establishments are defined as establishments 75% of whose annual dollar volume of sales of goods and/or services is not for resale and is recognized as retail sales or services in a particular industry.
  • More than half of your total earnings must represent commissions.
  • Your total compensation divided by the number of hours you work or your regular hourly rate must be greater than one and one-half times the federal minimum wage.

If your employer has classified you as exempt from the FLSA’s overtime requirement under the retail or service establishment exemption, but you do not meet all three tests above, you may be misclassified and could be entitled to up to three years of unpaid overtime, plus additional wages.

H. Other Fair Labor Standards Act (“FLSA”) Exemptions

Although this list is not conclusive, if you qualify for any of the following less common FLSA exemptions, you may not be eligible to receive overtime pay:

  • You are employed by a seasonal amusement or recreational establishment.
  • You are engaged in fishing operations.
  • You deliver newspapers.
  • You are a farm worker employed on a small farm.
  • You are a casual babysitter.
  • You are an auto, truck, trailer, farm implement, boat, or aircraft salesperson employed by a non-manufacturing establishment that is primarily engaged in selling those items to ultimate purchasers.
  • You are employed by a railroad or air carrier.
  • You are a taxi driver.
  • You are a domestic service worker and you reside at your employer’s residence.

I. Changes in Exemption Status

Occasionally, employers may change workers’ exemption status from exempt to non-exempt. This means that employees, who previously did not receive overtime compensation, suddenly become eligible for overtime pay for hours worked moving forward. Employers may make this change for a number of reasons, such as to ensure they comply with wage and labor requirements. If an employer reclassifies an employee, there is a chance that the employee was misclassified to begin with. If this is so, then the employee may be entitled to overtime compensation for overtime hours worked before the reclassification occurred. If your status changed to non-exempt, then you may be able to recover additional overtime compensation for work performed before the reclassification.

Reclassifications are occurring on a widespread basis within the mortgage industry, particularly with loan officers and underwriters. These employees, may be entitled to up to three years of overtime pay for their overtime hours worked, plus additional compensation.

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