The minimum wage that must be paid to all covered, non-exempt employees will increase to $7.25 per hour on July 24, 2009. The current federal minimum wage is $6.55 per hour, and the current minimum wage in Pennsylvania, New Jersey and Delaware is $7.15 per hour. Effective July 24, 2009, employers in those states will be required to pay non-exempt employees no less than $7.25 per hour.
In light of this upcoming minimum wage increase, employers are encouraged to review their payroll practices to ensure that all employees considered “non-exempt” under the Fair Labor Standards Act (FLSA) receive at least the required $7.25 per hour. Employers should also update their posters to notify employees of the new minimum wage rate, as required under both federal and state law.
This change in the minimum wage presents an opportune time for employers to review their overtime policies and job descriptions to ensure compliance with the FLSA.
Additionally, this change in the minimum wage presents an opportune time for employers to review their overtime policies and job descriptions to ensure compliance with the FLSA. Not only does the FLSA require employers to pay “non-exempt” employees at least the federal minimum wage for all hours worked, but employers must pay employees overtime at the rate of at least 1½ times their regular hourly rate for all hours worked in excess of 40 in a workweek. However, certain employees are exempt from the FLSA overtime provisions. Generally, these “exempt” employees have job duties that involve some degree of management or supervision, independent decision-making or discretionary authority, or specialized skills and abilities. Bona fide “exempt” employees fall into one of the following exemptions from the Fair Labor Standards Act’s overtime requirement:
- Executive Exemption – Generally responsible for managing the company or some aspect of it, as well as directing the employment of at least two full-time employees (or their equivalent). Has authority to hire, fire, promote, etc.
- Administrative Exemption – Performs office or non-manual work related to the management of the business. Primary duties include exercise of discretion in matters of significance to the company.
- Learned Professional Exemption – Primary duties involve work requiring advanced knowledge, which work is predominantly intellectual in character and requires the exercise of discretion and judgment.
- Creative Professional Exemption – Performs work requiring invention, imagination, originality, or talent in artistic or creative endeavors.
- Outside Sales Exemption – Primary duties involve making sales or obtaining orders, typically away from the employer’s place of business.
- Computer Exemption – Engaged as a computer systems analyst, computer programmer, software engineer or other similarly skilled worker in the computer field, performing systems design, analysis, documentation, etc.
- Highly Compensated Exemption – Earns at least $100,000 per year and performs office or non-manual work and regularly performs the duties of one or more of the foregoing “exempt” categories.
If an employee falls into any of the above exemptions and is paid on a salary basis (receiving a fixed regular amount regardless of how many hours are worked in a pay period), and receives at least $455 per week (or at least $27.63 per hour for Computer Employees paid on an hourly basis), the employee may be classified as exempt. However, these are merely summaries of the exemptions, and employers should review all relevant factors to determine proper classifications.
It is important to note that job title alone does not determine an employee’s exempt or non-exempt status under the FLSA. Rather, to determine whether an employee is exempt from the overtime rules, each position must be evaluated on the basis of a number of factors, including those described above. This is a fact-intensive analysis, and employers may wish to consult with counsel during the process to assist them in properly classifying employees and in drafting or updating job descriptions that are consistent, not only with job duties, but also with exempt/non-exempt classifications.
An employer may be assessed significant penalties and be subject to an audit of its workforce by the state or federal labor department if the employer improperly classifies an employee as exempt and fails to pay required overtime as a result. These penalties include payment of back wages and overtime for the past two years (three years, if a willful violation) for all misclassified employees in the workforce. If a claim is filed in court, an employer also may be liable for payment of liquidated damages and attorneys’ fees and costs.
Stradley Ronon’s Employment and Labor Practice Group is available to assist employers in reviewing employee classifications, drafting or revising job descriptions, providing the necessary posters and developing appropriate employment practices compliant with state and federal wage and hour laws.
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