The Fair Labor Standards Act (FLSA) is a seminal federal law that establishes the federal minimum wage, the right to overtime pay, recordkeeping requirements, and certain standards for the employment of minors in the U.S. Some of these rights depend on the status of people as employees and whether they are classified as exempt or non-exempt. Since the FLSA protects employees, it’s also important to understand the classification of workers as independent contractors vs. employees. When an employee is misclassified as exempt or as an independent contractor, some of the protections of the FLSA will not apply. This makes it important for workers to make sure they are classified correctly at their jobs. Here is what you should know about the FLSA status meaning from a New Jersey employment attorney at Swartz Swidler.
Which Employers and Employees Are Covered by the FLSA?
The FLSA only applies to employers with annual revenues of at least $500,000 and those who engage in interstate commerce. While this might seem like it doesn’t cover many small employers, the law applies to most companies in the U.S. based on engaging in interstate commerce. Employers are deemed to engage in interstate commerce when they use U.S. mail to send or receive letters to and from other states, place interstate phone calls, receive supplies, and otherwise interact with other states. While small firms and certain types of businesses are not covered by the FLSA, most employers are.
Only a small subset of employees are excluded from the FLSA, including farm workers, movie theater employees, domestic workers, and positions covered by other federal labor laws such as truck drivers and railroad workers. However, the vast majority of employees are protected by the FLSA.
FLSA Status Meaning
There are a couple of employee statuses under the FLSA, including exempt and non-exempt. Employers might also classify workers as independent contractors or employees. The status assigned to an employee by an employer is important for the protections they enjoy. However, an employer does not have the final say in how a worker is classified. Instead, their status is dependent on the duties of their jobs and other factors.
Exempt employees must receive a minimum weekly salary of $684 per week under federal law and are not entitled to receive overtime pay when they work more than 40 hours per week. Non-exempt employees must be paid at least the minimum wage and overtime pay when they work more than 40 hours per week. the overtime pay is calculated at 1.5 times their regular hourly rate.
Exempt Employee Status
Employees must meet the following criteria to be correctly classified as exempt:
- Receive a minimum annual salary of $35,658 or $684 per week
- Must be paid a salary instead of an hourly wage
- Must have administrative, executive, professional, or computer jobs involving exempt job duties
Commissions, incentives, and non-discretionary bonuses can be counted toward the employee’s annual salary to meet the salary test, but they can’t comprise more than 10% of the exempt employee’s salary. Highly compensated employees who make more than $107,432 per year are nearly always classified as exempt. The money the employee receives must also be paid as a salary that doesn’t vary from pay period to pay period based on the quality of their work or the hours they complete.
The duties test is the most complicated for exempt status. An employee can only be classified as exempt when the duties involved with their jobs meet the following criteria as established by the U.S. Department of Labor (DOL):
- Executive employee – The primary job duty must be to manage a subdivision, department, or enterprise itself. The exempt employee must also regularly supervise and direct two or more full-time employees in how they perform their work and have the authority to hire and fire employees. Finally, they must be able to provide opinions about personnel decisions.
- Administrative employee – An administrative employee’s primary job duty must be to complete office work related to the company’s operations or management. They must be allowed to exercise independence and discretion about matters of significant importance for the company.
- Professional employee – The employee must be a learned professional who has a primary duty of performing work requiring an advanced degree or knowledge in a field that requires a prolonged course of instruction.
- Creative professional employee – The primary job duty must be to perform work requiring talent, originality, imagination, or invention in a recognized creative or artistic field.
- Computer employee – The employee must be employed as a software engineer, computer program, or systems analyst or in a position that requires similar skills in the computer industry.
- Outside sales employee – The employee’s primary duty must be to make sales or obtain orders from customers, and they must typically work outside of the employer’s regular workplace.
Independent Contractor vs. Employee
Status as an independent contractor is not an FLSA status, but it is still important. Independent contractors are not considered employees and are responsible for remitting the employer portions of Social Security and Medicare taxes and federal and state income taxes. They also are not guaranteed the state minimum wage and aren’t eligible for overtime compensation. To determine whether a worker is an independent contractor, courts consider several factors, including the degree of control the employer exercises over the person’s work, whether they set their own hours or are required to report at specific times, and others.
Contact Swartz Swidler
If you think your employer has misclassified you as an exempt employee or independent contractor, you should contact a New Jersey employment attorney at Swartz Swidler. Call (856) 685-7420 to schedule a free case evaluation.
