Employee, Laws and Acts
November 7, 2012
The federal government is taking a much closer look at how employees are classified and if employers are abiding by appropriate wage and hour laws. For manufacturing companies, a major concern is the distinction between non-exempt and exempt employees.
The most important issue regarding non-exempt employees is that you pay them for all hours worked, and pay overtime rates when they work over 40 hours (or over 8 hours in one day in some states). This includes all work time, whether in your facility, when running errands for the company, or when working at home. So make sure you have a consistent system in place to account for all hours worked, and that the employees are informed of their rights and responsibilities.
Exempt employees are not covered by the same wage and hour laws as non-exempt, so you have greater latitude in how you compensate them. However some companies have misconceptions about what constitutes an exempt employee. For example, simply giving an employee the title of “Manager” does not necessarily mean he or she is an exempt employee.
The Fair Labor Standards Act (FLSA) lays out specific guidelines for classifying an employee as exempt. Currently, to qualify as exempt, an employee must meet three tests: (1) minimum annual salary of $23,600; (2) the employee is paid a salary, not an hourly wage; (3) the employee is an executive, a professional or an administrator. Each of these titles has specific duties attached to it. An executive, for instance, supervises two or more other employees, works primarily as a manager, and has actual input into hiring, firing, assigning tasks and other managerial duties. There are also some occupations that are automatically classified as exempt, such as professionals and outside salespeople.
Most employers want to do the right thing for their employees and obey the FLSA regulations. After all, that’s in everyone’s best interests. It’s more common for employers to simply misunderstand the exempt classification. And some non-exempt employees may think they are helping the company by putting in extra time “off the clock.” That’s why every employer should have its HR department and/or legal advisors periodically review its wage and hour practices to insure compliance and help the company avoid potential legal problems.