Are You Owed Overtime Wages?

The Fair Labor Standards Act (FLSA) requires covered employers to pay all non-exempt employees the federal minimum wage. It also requires covered employers to pay non-exempt employees 1.5 times their regular rate for any overtime hours, which are defined as any hour worked in excess of 40 hours in a seven-day workweek. The FLSA is complex, and it is not always easy to know whether you may be entitled to a premium for your overtime hours. There are many exemptions to the FLSA, and each has key nuances that many do not fully understand. The purpose of this article is to summarize what you need to know to determine whether you may be entitled to a premium for your overtime hours.

Are You an Employee

The FLSA only applies to employees—not independent contractors. The test for determining whether you are an employee is referred to as the “economic realities test.” Under this test, workers are considered employees if they are economically dependent on the employer for their income. In other words, if you work full time for your employer, you are likely an employee.

Is Your Employer Covered?

The FLSA applies to all employers who have any contracts with the federal government or who are “engaged in interstate commerce.” Employers are engaged in interstate commerce if (1) employees handle, sell, or otherwise work on goods that have been moved in or produced for commerce, and (2) the employer has annual gross revenue of at least $500,000. In this day and age, almost every employer is engaged in interstate commerce because they buy and sell goods across state lines. Even accepting credit or debit cards from an out-of-state bank or credit card company is generally sufficient to establish the employer is engaged in interstate commerce.  

Most employers are covered by the FLSA given the relatively low gross revenue requirement and the expansive “interstate commerce” test.

Are You Defined as Exempt?

There are at least 44 different exemptions under the FLSA. If one of the exemptions apply, you may not be entitled to a premium for your overtime hours. The most common exemptions are referred to as the white collar exemptions. They include the following: (i) administrative, (ii) professional, and (iii) executive. If any of these exemptions apply, you are not entitled to a premium for your overtime pay. Each exemption requires that the employer pay the employee a salary of $455 per week. The other elements of these three exemptions are discussed below.

Administrative Exemption

The administrative exemption requires the employer to prove all of the following: 

• The employee performs office or non-manual work, which is directly related to management of the business;
• A primary component of which involves the exercise of independent judgment and discretion about matters of significance.

Work “directly related to management of the business” includes, but is not limited to, working in areas such as tax; finance; accounting; budgeting; auditing; insurance; quality control; purchasing; procurement; advertising; marketing; research; safety and health; personnel management; human resources; employee benefits; labor relations; public relations; government relations; computer network, Internet and database administration; legal and regulatory compliance; and similar activities.  

In general, the “exercise of discretion and independent judgment” involves the comparison and the evaluation of possible courses of conduct and acting or making a decision after the various possibilities have been considered.  The term, exercise, must be applied in the light of all the facts involved in the employee’s particular employment situation, and implies that the employee has authority to make an independent choice, free from immediate direction or supervision.   

The term “matters of significance” refers to the level of importance or consequence of the work performed.  An employee does not exercise discretion and independent judgment with respect to matters of significance merely because the employer will experience financial losses if the employee fails to perform the job properly.   

The key here is that the employee’s “primary duty” must be to exercise their discretion and independent judgment concerning matters of significance. Generally speaking, office workers are not exempt if their primary duty is to follow the directives of their employer.  

Professional Exemption

The Professional exemption requires the employer to prove each of the following:

1. The employee’s primary duty must be the performance of 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; 
2. The advanced knowledge must be in a field of science or learning; and 
3. The advanced knowledge must be customarily acquired by a prolonged course of specialized intellectual instruction.  

“Work requiring advanced knowledge” means work which is predominantly intellectual in character and which includes work requiring the consistent exercise of discretion and judgment. A professional employee generally uses the advanced knowledge to analyze, interpret or make deductions from varying facts or circumstances. Advanced knowledge cannot be attained at the high school level. 

Fields of science or learning include law, medicine, theology, accounting, actuarial computation, engineering, architecture, teaching, various types of physical, pharmacy,  chemical and biological sciences,.   These occupations have a recognized professional status and are distinguishable from the mechanical arts or skilled trades where the knowledge, while of a fairly advanced type, is not in a field of science or learning. The learned professional exemption is restricted to professions where specialized academic training is a standard prerequisite for entrance into the profession.

Executive Exemption

The executive exemption requires the employer to prove each of the following:  

1. The employee’s primary duty must be managing the enterprise, or managing a customarily recognized department or subdivision of the enterprise;
2. The employee must customarily and regularly direct the work of at least two or more other full-time employees or their equivalent; and
3. The employee must have the authority to hire or fire other employees, or the employee’s suggestions and recommendations as to the hiring, firing, advancement, promotion or any other change of status of other employees must be given particular weight.

As you can see, it is not always easy to determine whether you are entitled to a premium for overtime hours. You must understand each of the above exemptions, as well as the more than 40 other exemptions.  

Assuming you are a non-exempt employee working for a covered employer, you may have an overtime claim under the FLSA. If you were to file a lawsuit against your employer, you could recover two times the amount you are owed in overtime wages and a mandatory award of attorney fees. An experienced employment attorney can help you determine whether you are owed a premium for overtime hours.