Employers must stay aware of the complicated laws and regulations that govern the employment relationship with their employees. The Fair Labor Standards Act (“FLSA”) is the federal law that governs, among other things, minimum wage and overtime regulations for employers to keep in mind. The FLSA creates two categories of employees – exempt and nonexempt. Nonexempt employees must receive overtime pay for hours worked over 40 per week at the rate of 1.5 times the regular rate of pay. In addition, non-exempt employees must be paid a minimum wage which complies with both federal and state law. In the Commonwealth of Massachusetts, the current minimum wage is $8.00 per hour. On the other hand, exempt employees do not have to be paid at a rate of 1.5 times the regular rate of pay when they work more than 40 hours per week. They do, however, have to be paid their full salaries during the week in which they work (with some limited exemptions).
There are various occupations that can fall under an exemption under the FLSA and Massachusetts laws. In addition, there are three main categories of employees who are considered exempt so long as they meet a salary basis test, are paid at least $455 per week and perform exempt job duties. These three main exempt job duty categories include executive, administrative and professional employees. In addition, exemptions exist for true outside sales employees and certain computer employees under the FLSA.
Though they may not have ill motives, employers often make the costly mistake of misclassifying their employees under the FLSA and/or Massachusetts law. A good deal of the litigation related to misclassification of employees involves the administrative exemption. Generally speaking, to be properly classified as exempt under the administrative exemption, an employee must be paid on a salary basis, perform work related to the general business operations of the employer or the employer’s customers, and perform work which involves the exercise of independent judgment and discretion about matters of significance.
It is important to note that exempt status is not determined by job title and employers must meet all of the salary and job duty requirements articulated by the regulations governing each exemption. Massachusetts provides for mandatory treble damages for non-payment of wages, even for mistakes made in good faith. Thus, it is crucial to properly classify employees to avoid a potential claim down the road for unpaid overtime from an employee everyone assumed to be exempt when hired.
