The US Department of Labor has announced a new salary test for the key 'white collar" exemption from overtime requirements, increasing the qualifying salary to $35,568 per year. It seems like a good time for a refresher quiz (and answers this week) on these important, and often misunderstood exemptions, and related legal requirements.
1. It is not necessary to provide unpaid breaks or lunch periods to employees in Illinois so long as you are consistent in this policy.
FALSE, Illinois law requires that a meal period be provided to employees who work at least seven and a half continuous hours. This break must be at least 20 minutes long and must start no later than five hours after the beginning of the shift.
2
.
Under the new DOL rules if an employee makes over $35,568 per year, it is permissible to pay the employee on an hourly basis and not pay that employee overtime.
FALSE, each of the "white collar" exemptions("professional, "administrative", "executive") from overtime require that the employee be paid on a "salary basis" in addition to the "duties" standards set for each. As noted below, the "salary basis" test does not apply to the "inside" and "outside sales" exemptions.
3.
In order to be considered exempt under the "white collar" exemptions, under either the new rules or the old rules, it is necessary for the employee to supervise at least two other individuals.
FALSE, this is true and required for the "executive" exemption, but not for the "administrative", "professional" and "inside" and "outside" sales exemptions.
4.
Under the new rules if an employee holds a professional degree they can be classified as exempt even if they are not paid a salary of at least $35,568 per year.
FALSE, to qualify for the "professional" exemption, the employee must meet both the "salary" level test(now $35,568) and the "duties" and status requirements of the "professional" exemption, i.e. that the employee hold a professional degree and perform that work as their primary duty.
5.
Under the new rules, exempt employees, who are paid a salary of over $35,568 per year, can be "docked" pay on an "hour by hour" basis so long as careful records are kept and they have forms of paid leave to use for these docked time periods.
TRUE. This can be done lawfully, but it may be inadvisable to do so as it may cause morale problems and can lead to suits if situations occur if "docking" occurs when the paid leave blank has been depleted.
6. In order to be considered exempt under the "white collar" exemptions, under either the new rules or the old rules, it is necessary that the employee have a managerial title and sufficient authority to back up that title.
FALSE, as the title and authority that an employee hold 'miss the point' as to the real qualifications for the exemption. The focus of the regulations is on the actual work performed by the employee. If an employee performs too much 'non-exempt' work as a practical matter, the exemption is lost. Many retail store managers and assistant managers have lost the exemption because they spent too much time stocking shelves, cooking French fries, or other non-exempt work.
7.
It is not necessary to supervise "two or more" employees to qualify for the "administrative" exemption from overtime under the FLSA.
TRUE. See answer to question 2 above.
8.
It is not necessary to supervise "two or more" employees to qualify for the "professional" exemption from overtime under the FLSA.
TRUE. See answer to question 2 above.
9.
The FLSA has an overtime exemption for "inside sales" employees that remains unaffected by the new rules.
TRUE. Under federal law, the inside sales exemption applies to employees who earn more than 150% of the minimum wage, derive at least 50% of their income from commissions and work within the "retail and service industry" as defined under the FLSA.
10.
The FLSA has an overtime and minimum wage exemption for "outside sales" employees that remains unaffected by the new rules.
TRUE.
Under federal law, an employee who qualifies for this exemption is exempt from both the minimum wage and overtime premium requirements. The employee's primary duty must be making sales (as defined in the FLSA), 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 and the employee must be customarily and regularly engaged away from the employer's place or places of business. The salary requirements of the regulation do not apply to the outside sales exemption.
If you have any questions about any of these answers or the regulations general, please do not hesitate to give any SB attorney a call.