On first blush wage and hour law may seem deceivingly simple. To be sure, the requirement to pay minimum wage, and to pay overtime (i.e., time and a half) for hours worked in excess of 40 in a single workweek sounds rather straightforward. But what about when you want to pay someone on a salaried basis? And are there special rules for hourly employees?
There are many thorny issues that employers need to understand in order to avoid costly lawsuits. This is why NFIB Small Business Legal Center has produced our trusty Guide to Federal Wage & Hour law. But here are some top-line points that you should understand:
Paying Non-Exempt Employees
Remember that while the federal minimum wage is $7.25, your state (or your locality) may require that you pay a higher minimum wage. Moreover, some states impose special rules to complicate matters. For example, Alaska, California, and Nevada require employers to pay overtime to employees after they’ve worked 8 hours in any single day—and Colorado imposes overtime requirements after 12 hours.
Importantly, employers should understand that they have an obligation to pay for all time worked. This means that employers should be tracking and recording hours worked for all non-exempt employees because the burden is on you to prove that you’ve properly compensated an employee if someone files a complaint. Importantly, there can be no off-the-clock work—such as work-related emails or phone calls.
Paying Exempt Employees
An employee may be “exempt” from the requirement to pay an hourly wage and from overtime rules if he or she performs duties that may be deemed executive, administrative, professional, computer-related, or outside sales. It may be difficult to determine whether an employee should be classified as exempt, especially if the employee performs different functions throughout the workweek. We provide more guidance on this issue in our Guide to Wage and Hour Law (see pages 9-11). But a general rule of thumb is that blue collar work must be paid on an hourly basis—not on a salary basis.
In addition to ensuring that salaried employees are performing the right sort of duties, employers should understand that they are not allowed to reduce the employee’s salary either for work performance or for disciplinary reasons. Moreover, federal law dictates that exempt employees must be paid at least $455 per week ($23,660 annually). And you should check to see whether your state requires higher pay for salaried employees. For example, both Washington State and Pennsylvania are contemplating raising salary requirements for exempt employees.
For more guidance on how to stay out of court, check-out the following:
- Rule 1 – Incorporate;
- Rule 2 – Stay Alert on Taxes;
- Rule 3 – Maintain Adequate Insurance;
- Rule 4 – Hire Smart;
- Rule 5 – Manage Fairly & Wisely;
- NFIB Small Business Legal Center’s October 10, 2018 presentation in Salt Lake City, entitled: “10 Ways to Stay Out of Court.”
*While the information provided here is intended to be accurate, it is not legal advice. Employers are advised to seek counsel from a trusted employment law attorney.