A common misconception about wage and hour law is that salaried employees are not eligible to receive overtime pay when they work more than 40 hours in a week. This is sometimes true, but not always.
Generally speaking, the law divides employees into “exempt” and “non-exempt” employees. An “exempt” employee is an employee who is exempt from the overtime laws – meaning that employers normally are not required to pay them time and 1/2 when they work more than 40 hours in a week. In order to be considered “exempt,” an employee DOES have to receive a regular salary that – for the most part – does not vary based on the number of hours they work. But (and this is an important “but”) receiving a regular set salary is not the ONLY requirement in order for an employee to be considered “exempt” from the wage and hour laws.
In order to be considered “exempt,” an employee must be performing a certain kind of work that falls into one of the exemptions recognized by federal and/or state law. There are literally dozens of exemptions, but if an employee doesn’t fall into at least one of them, then he or she is entitled to be paid overtime regardless of whether or not he or she is “salaried.” The most common exemptions are for executives, professionals, administrative employees who exercise a great deal of discretion and independent judgment in their jobs, and outside salespeople.
The wage and hour laws are among the most complicated laws that govern the employment relationship. As a consequence, it is very common for employers to “miss-classify” an employee as being exempt when they are not. When an employer makes a classification mistake, it can be very expensive, as employees can recover not only their lost wages, but also additional damages and attorney’s fees from the employer who makes the classification mistake. This is also a field in which employers can be subject to hugely expensive “class action” lawsuits, filed on behalf of dozens, hundreds, or even thousands of employees.
When it comes to classifying employees as either “exempt” or “non-exempt,” it is literally true that “you can’t be too careful!” If you have any questions or concerns about these issues – as an employer or employee – be sure to consult with competent employment counsel.