Many of the individuals we represent in unpaid wage and overtime lawsuits are people who have been classified as exempt from overtime by their employer. Most of the time, these people have been told by their employer that they are not entitled to overtime because they are exempt (legally not entitled to overtime), and the people accepted what their boss told them. But you should never take your employer’s word for it. Just because your boss tells you that you are exempt from overtime does not mean that you are an exempt employee. The law determines if you are exempt- not your employer’s interpretation of the law.
If an employer determines that an employee is exempt from overtime when the employee is actually not exempt, this is known as misclassification. Because so many people are unaware of these exemptions, we felt that we should write a series of posts explaining the main exemptions. Here is what you need to know:
1) What is an exemption? Under the Fair Labor Standards Act (“FLSA”) and New York Labor Law (“NYLL”) an employer has to pay an employee overtime (1.5 X the regular hourly rate) for any time worked over 40 hours in the workweek. But under the FLSA and NYLL, certain employees are not entitled to overtime- they are exempt from the overtime requirements. This means that if an exempt employee works more than 40 hours in the work week, the employer is not required to pay the employee overtime for those hours.
2) What are the main overtime exemptions? There are many exemptions from the overtime requirements. However, there are six main categories of exemptions that fall under a category known as “white collar” exemptions. These employees are generally office employees in positions of significance. The white collar exemptions are as follows (links are provided to department of labor fact sheets to explain more):
- The Executive Exemption: https://www.dol.gov/whd/overtime/fs17b_executive.pdf
- The Administrative Exemption: https://www.dol.gov/whd/overtime/fs17c_administrative.pdf
- The Professional Exemption: https://www.dol.gov/whd/overtime/fs17d_professional.pdf
- Computer Employees: https://www.dol.gov/whd/overtime/fs17e_computer.pdf
- The Outside Sales Exemption: https://www.dol.gov/whd/overtime/fs17f_outsidesales.pdf
- Highly Compensated Employees: https://www.dol.gov/whd/overtime/fs17h_highly_comp.pdf
3) What employees are usually not exempt? There are groups of employees that are generally not considered exempt from overtime. These people are as follows:
- Manual laborers or other “blue collar workers” who perform work with their physical skill and energy;
- Non-Management employees in production, maintenance, construction and similar occupations such as electricians, carpenters, plumbers, mechanics, etc.;
- Emergency workers such as police officers, firefighters, medical technicians, etc.
- Trainees- people who are being trained as management but do not have managerial authority.
4) The salary basis test.The main requirement to be exempt is that you must be paid a salary of at least $455 per week (this doesn’t apply to the outside sales category). If you are working in an exempt category, but paid by the hour, then you are entitled to overtime. Additionally, if you are paid a salary, but your employer deducts certain time from your pay if you miss work, then you may also be entitled to overtime. Under the law, being paid on a “salary basis” means you regularly receive a predetermined amount of pay each pay period on a weekly, or less frequent, basis. You are not paid a salary if your employer reduces or changes your pay based on the quality or quantity of your work. Subject to certain exceptions, exempt employees must receive the full salary for any week in which the employee performs any work, regardless of the number of days or hours worked. Exempt employees do not need to be paid for any workweek in which they perform no work. If the employer makes deductions from an employee’s predetermined salary, i.e., because of the operating requirements of the business, that employee is not paid on a “salary basis.” If the employee is ready, willing and able to work, deductions may not be made for time when work is not available.
6) What if my boss tells me I am exempt when I am not exempt? If your employer misclassifies you and does not pay you overtime, then you are entitled to receive overtime for all overtime hours, liquidated damages (generally), costs of the lawsuit and reasonable attorney fees. In many cases employees are paid less than the minimum wage when you compute their hourly wage rate, and would be entitled to the difference between the minimum wage and the actual rate of pay they received.
- To compute your overtime rate, you would have to divide your weekly earning by all the hours you worked, and then multiply the result by 1.5 to arrive at your overtime rate of pay. You would be entitled to the overtime premium for each overtime hour worked. For example, if you earned $400 per week and worked 50 hours that week your rate of pay is $8.00 per hour $400/50=$8.00). Your overtime rate is $12.00 ($8.00 x 1.5). Since you worked 10 hours of overtime (50-40=10), you would be entitled to $4.00 per hours for each overtime hour (10 in this example) for the week- $40. In many cases you would actually be entitled to an additional $40 as a penalty known as liquidated damages. If this happened 50 weeks in the year, you would be entitled to $2,000 for the year.
- To compute a minimum wage violation, you would have to subtract your hourly rate from the minimum wage. In this example, the New York State Minimum Wage in Westchester County is $10.00 per hour (as of the date of this post). Subtract the $10 an hour minimum wage from the $8.00 you were paid and you will have been underpaid by $2.00 per hour ($10-$8.00= $2.00). Here, you would be entitled to $2.00 per hour for each hour of work, so if you worked 40 hours in the week, you would be entitled to $80 in actual wages owed ($2.00 x 40 hours). Again, you would generally be entitled to receive a penalty of an additional $80- so the total would be $160 for the week. If this happened 50 weeks of the year, you would be entitled to $8,000.
So in the above example, for 1 year of work, an employee is entitled to $10,000 if they won a lawsuit. They were underpaid by an actual $416.66 each month that they worked. What could you do with an additional $416 each month? That would pay for a brand new car lease! Under New York State law, an employee can recover up to 6 years of unpaid wages, so if this happened each year, the employee would be entitled to $60,000.00.
This is why employers play games with misclassification. If they can save $416 a month for 1 employee, a small employer with 10 employees can save $4,160 a month, or $49,920 per year. If they have 100 employees they save $499,200 a year. This is why misclassification is a major problem, and because the law gives wiggle room for an employer to argue that you are exempt, it is worth it for them to take the chance and misclassify you.
7) How to learn more. In the next post, we will go into the exemptions in more detail so you can better determine if you are classified correctly.
To learn more about your rights under the wage and overtime laws, disability law, discrimination laws, or family & medical leave law, visit:
http://22.214.171.124. El-Hag & Associates P.C is a Labor Law Firm and Employment Law Firm located in Westchester New York. We are overtime lawyers, discrimination lawyers, employment lawyers and labor lawyers. We fight for the rights of working people and we do not represent business owners. So if you have a problem at work, please give us a call to learn more about your rights in the workplace.
El-Hag & Associates, P.C
777 Westchester Ave, Suite 101, White Plains, New York, 10604
• http://126.96.36.199 • Jordan@Elhaglaw.com • (914) 218-6190 (office) • (914) 206 -4176 (fax)
** Disclaimer- This blog post is applicable to employees working in NY State. Some of the information is applicable outside of NY State, but you should check the laws of the state in which you work. Additionally, this information is not intended as legal advice. If you have legal questions CALL OUR OFFICE. We do not want you to take any action relying on this information without being fully informed. You need to make sure that your circumstances protect you under the law before you act.