Monday, May 21, 2018

Can employers pay exempt employees an hourly wage for extra hours?

The federal Fair Labor Standards Act (FLSA) requires employers to pay employees an overtime premium (time-and-a-half) for hours over 40 worked in a workweek. Of course, there are a ton of exemptions. Generally, the exemptions depend on the employee's primary duties and require that (s)he get paid on a salary basis.

Not official use.
Can employers ask salaried exempt employees to work extra hours in exchange for extra pay (without losing the exemption)? This always seemed a little counterintuitive to me . . . after all, the point of the salary basis test is that employees get paid a set amount regardless of how many hours they work. However, it turns out the DOL regs expressly provide for this kind of dual-payment scenario:
An employer may provide an exempt employee with additional compensation without losing the exemption or violating the salary basis requirement, if the employment arrangement also includes a guarantee of at least the minimum weekly-required amount paid on a salary basis . . . Such additional compensation may be paid on any basis [including a] straight-time hourly amount.
29 CFR § 541.604 Minimum guarantee plus extras (emphasis added).

There you have it. Employers can actually pay exempt employees on an hourly basis and not lose the exemption (so long as the employee is also paid the minimum required salary, currently $455/week).

The reg also expressly identifie
s other "extra" payments:

  • Commissions on sales;
  • Flat sum;
  • Bonus payment;
  • Time and one-half; and
  • Paid Time Off (PTO).
Don't forget to check state laws though!