Our webcast, Do I Have to Pay My Employees for That?, generated many questions from attendees on overtime, worker classifications, and other pay-related scenarios. In this Tip, we address the most frequently asked questions we received.
Exempt vs. Non-Exempt Classifications
Q: What is a non-exempt employee?
A: A non-exempt employee is entitled to at least the minimum wage for each hour worked and overtime pay for all hours worked over 40 in a workweek. Some states require overtime in additional circumstances. Most employees are classified as non-exempt; very few will meet the exemption criteria set by federal and/or state law.
Q: What is an exempt employee?
A: An exempt employee is generally paid on a salary basis and is not entitled to overtime. Job titles do not determine exempt status. To be classified as exempt, the employee must meet certain salary and duties tests established by federal and applicable state laws.
Q: If an employee meets the tests to be exempt from overtime, do I have to classify them as exempt?
A: No. You may classify any employee as non-exempt (and pay them overtime when due). By contrast, only employees who meet applicable exemption tests may be classified as exempt.
Q: During inclement weather, can I require exempt employees to use paid time off (PTO) if we remain open but they are unable to come to work?
A: Under federal law, if the company remains open and exempt employees do not report to work, you may generally require them to use accrued PTO.
Q: If an exempt employee only worked for 2 hours of an 8-hour work day and then left due to personal reasons, can I deduct the 6 hours of missed work from her salary?
A: No. The Fair Labor Standards Act (FLSA) generally prohibits deductions from exempt employees’ salaries for partial-day absences, except for those occurring in the first or last week of employment or for unpaid leave taken under the Family and Medical Leave Act. Additionally, full-day deductions are restricted to a few limited situations.
Q: Can exempt employees take paid time off in 4-hour increments or only in 8 -hour increments?
A: Under federal law, employers can charge an exempt employee’s paid leave bank for partial-day absences, provided the employee suffers no loss in pay. However, some states place restrictions on charging an exempt employee's paid leave bank. Check your state law for more information. Remember, partial-day salary deductions are prohibited except in a few narrow circumstances, covered above.
Q: When do I have to pay “time and a half” (overtime)?
A: Under the FLSA, employers must pay non-exempt employees overtime (1.5 times their regular rate of pay) whenever they work more than 40 hours in a workweek. A few states also require double time under certain situations or time and a half after a certain number of hours worked in a day (also known as daily overtime). Check your state law to ensure compliance.
Q: What is considered a workweek? Is it Monday to Sunday? Can it start on another day?
A: A workweek is a fixed and regularly recurring period of 168 hours, or seven consecutive 24-hour periods. The workweek can begin on any day and at any hour.
Q: Is overtime pay required for an employee who is paid biweekly if one week he works over 40 hours, but his two-week total is less than or equal to 80 hours?
A: Yes, you must pay the employee overtime. The FLSA requires overtime whenever a non-exempt employee works more than 40 hours in a workweek. The FLSA prohibits employers from averaging two or more workweeks to determine whether overtime pay is due.
Q: Is a part-time worker with a salary of less than $455/week automatically considered a non-exempt employee?
A: In general, to be classified as exempt under federal law, the employee must, among other things, earn a salary of at least $455 per week. The salary threshold of $455 per week is the same regardless of whether the employee is part-time or full-time. Unless the employee qualifies under the outside sales exemption, which has no salary requirement, a salary of less than $455 would mean the employee must be classified as non-exempt.
Note: The Department of Labor is expected to propose new exemption tests this spring. One of the anticipated changes is an increased salary requirement. Watch for continued developments in this area.
Q: If non-exempt employees are instructed not to work more than 40 hours a week and they go over, do they have to be paid overtime or can they be paid their regular rate?
A: You must pay the employee the applicable overtime rate for all hours worked in excess of 40 during the workweek. You may, however, subject the employee to disciplinary action, but in no case may you withhold pay or fail to pay overtime.
Q: What are the pay requirements for travel outside the employee’s regular work hours?
A: If the travel is within the same day (the employee returns home at the end of the day), you must pay employees for their travel time even if it occurs outside their normal working hours. However, you may subtract their normal commute from the total. If the travel keeps the employee away from home overnight, the time that cuts across the employee’s regular working hours (regardless of the day of the week the travel occurs) must be paid.
Q: For overnight travel, do I have to pay for the time spent at the airport prior to the flight for security clearance?
A: For overnight travel, you must generally pay employees for any portion of the travel that occurs during their regular working hours, regardless of the day of the week it occurs. This includes time spent waiting at the airport and traveling to a final destination, such as to the hotel or worksite.
Q: Does the FLSA allow me to pay employees a lower wage for travel time than for regular working time?
A: The FLSA allows employers to establish a separate wage for travel and other "nonproductive" work hours, provided the following requirements are met (see 29 CFR 778.318(b)):
- The wage equals or exceeds the applicable minimum wage; and
- The employee has agreed to the separate wage in advance.
Because of the challenges of administering separate wage rates (including calculating overtime), many employers choose to pay employees the same wage for both productive and nonproductive hours. If you wish to establish separate rates, make sure you comply with all applicable laws and obtain a written agreement from the employee.
Q: We have an extensive orientation program that includes some basic skills training. Do we have to pay new hires for this time? What about new hire orientation that occurs by phone?
A: Yes, you must pay employees for the time spent in orientation, regardless of whether they attend in person or via phone. This is considered training time. In order for training time to be unpaid, the training must meet all four of the following criteria:
- Attendance is outside of the employee's regular working hours;
- Attendance is voluntary;
- The course, lecture, or meeting is not directly related to the employee's job; and
- The employee does not perform any productive work while attending the training.
Keep in mind that the answers above address federal law, but your state or local law may differ. Where federal, state, and local law conflict, the law more generous to the employee typically applies.