Am I Exempt from Overtime Laws if I Receive Compensation on Top of My Base Salary?

The Fair Labor Standards Act (FLSA) establishes the basic overtime and wage hour rules for employees throughout the country. A key part of these rules deals with which employees are “exempt” from the normal minimum wage and overtime pay requirements. For example, individuals employed in “executive, administrative, or professional” (EAP) roles may be exempt if they meet certain conditions.

In order to qualify, an EAP worker must be paid on salary. That is to say, they must receive a predetermined amount of income for each pay period regardless of the specific number of hours worked. This salary must be equal to at least $455 per week. If an EAP worker meets these tests, then he or she is not legally entitled to overtime.

U.S. Labor Department Clarifies Exemption Standards

What about a situation in which an employee receives a fixed “base” salary but also receives additional commissions or bonuses? Is such an employee still considered exempt under the FLSA? The short answer is yes, provided such additional payments are not the “primary” source of the employees' compensation. In other words, if an employee earns $500 per week in base salary but also routinely receives over $2,000 per week in commissions, that employee probably would not qualify as exempt according to the FLSA's salary basis test.

Recently, the U.S. Department of Labor's Wage and Hour Division, which oversees FLSA enforcement, issued a written opinion letter that further elaborates on these rules. The Division's letter came in response to a request from an unidentified party whose client, an engineering firm, currently classifies many of its engineers and senior designers as “exempt professionals.”

The firm presently guarantees these professionals a weekly salary of $2,100, which assumes a 30-hour workweek compensated at $70 per hour. The $2,100 is guaranteed regardless of hours worked, but if an engineer works more than 30 hours, he or she is paid $70 for each additional hour. So let us say an engineer works 45 hours in a given week. She is then paid a $2,100 base salary plus $1,050 for the 15 hours worked in excess of 30 per week, for total compensation of $3,150. Overall, the firm said the average member of its engineering staff earned $2,721 per week, which was $621 above the base salary.

Based on these parameters, the Division said it could continue to classify its employees as exempt, provided that a given engineer's “usual weekly earnings” did not exceed $3,150. This represents 1.5 times the base salary of $2,100. Any earnings in excess of the 1.5-to-1 ratio would raise concerns under the FLSA, so an engineer earning more than $3,150 per week on a regular basis could probably not be considered exempt.

Speak with a New York City Overtime and Wage Hour Lawyer Today

Employee misclassification is a serious violation of the FLSA. If you have reason to believe your employer is improperly exempting you from minimum wage and overtime laws, you need to speak with a qualified New York employment attorney who can advise you of your rights and the appropriate steps to take next. Contact the Law Offices of Mahir S. Nisar to schedule a consultation with a member of our legal team today.