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How to navigate the Fair Labor Standards Act when a salaried employee demands overtime pay
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How to navigate the Fair Labor Standards Act when a salaried employee demands overtime pay

The Fair Labor Standards Act (FLSA) is a federal law in the United States that sets standards for minimum wage, overtime pay, and other employment regulations. When it comes to overtime pay, understanding the rules and exemptions can be complex, especially for commissioned employees. Learn how the FLSA treats overtime pay for commissioned employees and the factors that determine their eligibility.

A complex issue may arise when a commissioned employee demands overtime pay, but is classified as an exempt employee under the FLAS. The law is complex and must be understood by the employee and the employer. It is critical that employers provide clear explanations of exempt status and maintain accurate recordkeeping in the employee’s file.

Commissioned employees are those who earn a significant portion of their compensation through sales or other commission-based activities. Examples include salespeople, professional employees such as doctors and lawyers, administrative employees, and certain retail workers. Unlike regular hourly or salaried employees, commissioned employees may be subject to different overtime pay rules due to the nature of their work.

The FLSA generally requires employers to pay covered employees minimum wage and overtime compensation, unless they are exempt. Non-exempt employees are entitled to overtime pay at a rate of one and a half times their regular pay for all hours worked over 40 in a workweek. However, the exemption status for commissioned employees is determined by meeting certain criteria.

The law requires that a salaried employee who is found to be exempt from overtime pay be paid both on a salary basis and at a rate of at least equal to the standard salary level of $648 a week (equivalent to $35,568 annually).

The most common FLSA minimum wage and overtime pay exemptions include these so-called white-collar exemptions:

Executive exemption

The employee's primary duty is management of the enterprise where the employee is employed or a customarily recognized department or subdivision of the enterprise.

Administrative exemption

The employee's primary duty must be the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer's customers, such as assisting with running or servicing the business; working in certain functional areas of the business; and advising or providing consultation to the employer's clients or customers, such as tax or financial information.

Professional exemption

The employee's primary duty is the performance of work requiring advanced knowledge in a field of science or learning, and customarily acquired by a prolonged course of specialized intellectual instruction.

Computer professional exemption

The employee's primary duty must include at least one of the following:

  • The application of systems analysis techniques and procedures, including consulting with users to determine hardware, software, or system functional specifications.
  • The design, development, documentation, analysis, creation, testing, or modification of computer systems or programs, including prototypes, based on user or system design specifications.
  • The design, documentation, testing, creation, or modification of computer programs related to machine operating systems.
  • A combination of these duties, the performance of which requires the same level of skills.

Outside sales exemption

Must have a primary duty that is either making sales (as defined) or obtaining orders or contracts for services or the use of facilities for which the client or customer is paying, and the employee must be customarily and regularly engaged away from the employer's place or places of business.

Highly compensated employee exemption

The employee must earn a total annual compensation that equals at least $107,432 and includes at least $684 a week paid on a salary or fee basis. The employee's primary duty must include performing office or non-manual work. The employee must customarily and regularly perform at least one of the exempt duties or responsibilities of an exempt executive, administrative, or professional employee.

While the FLSA provides general guidelines for determining overtime pay, there may be state-specific laws that further impact commissioned employees. Some states have their own overtime laws that set stricter requirements or differ from the federal guidelines. It is essential for employers and employees to consult state labor laws to ensure compliance. If you are unsure if your salary employee falls under one of the exemptions, you should consult your HR specialist or an attorney licensed to practice in your state. You can find more information on the U.S. Department of Labor Website.

Understanding overtime pay for commissioned employees under the FLSA is vital for employers and employees. The FLSA provides exemptions that can affect whether commissioned employees are entitled to overtime pay. By fostering open communication and understanding the intricacies of overtime regulations, both parties may mitigate potential disputes and ensure fair treatment within the framework of the FLSA.

Disclaimer: All information in this article is intended for legal information only and is not considered a substitute for legal advice. If you need legal advice, you should consult with an experienced attorney licensed to practice in your jurisdiction.

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