Wage & Hour Issues: Exempt Versus Non-Exempt Employees – An Overview

The Connecticut and Federal Wage and Hour Laws
Connecticut’s wage and hour laws establish a minimum hourly wage, conditions of overtime pay, and guidelines for determining the hours employees work. The Connecticut wage and hour laws apply to employers in the state of Connecticut, including the state itself and any political subdivisions.

A federal law, the Fair Labor Standards Act (“FLSA”), also regulates wages and hours of employment, setting standards for minimum wages, overtime compensation, and other matters. As a general rule, the FLSA covers employers engaged in interstate commerce or the production of goods in commerce that have a gross volume of $500,000.00 in sales. Hospitals, schools and public agencies are covered by FLSA regardless of their volume of business. Note that “commerce” is very broadly defined to mean “trade, commerce, transportation, transmission, or communication” among the several states or between any state and any place outside of the state. Further, employees are covered by the FLSA if they are engaged in commerce or in the production of goods for commerce, even if they do not work for an employer that is subject to coverage as an entity.

Where an employer is covered by both the state and federal laws (as most employers are), the law that provides the higher or stricter standards shall apply.

Certain employees are exempt from federal and state minimum wage and overtime pay provisions, as well as some of the record-keeping requirements. The most widely used and recognized exemptions are for those employees who meet the state and federal definitions of Executive, Administrative, Professional, or Outside Sales positions. These are sometimes referred to as the “white collar” exemptions.

 It is a common misperception that anyone paid on a salary basis is considered exempt. Employers must understand that simply placing an employee on salary does not automatically make him/her exempt. Salary is only one part of the determination. In order to be exempt, the employee in question must also perform exempt duties.

Duties and Salary: Two Critical Areas in Determining Exempt Status
There are two critical tests to determine whether an employee is appropriately classified within one of the exempt categories: the “duties” test and the “salary” test.

The Duties Test
To be exempt, the employee’s primary duty must be to perform tasks of an exempt nature. As a general rule of thumb, “primary duty” means the major part, or over 50 percent, of the employee’s time. Further, the employee must regularly exercise discretion and independent judgment.

The controlling factor in determining an exemption is the employee’s actual duties. Duties are generally either exempt or non-exempt in nature. While the specific criteria for duties vary somewhat depending on whether exempt status is claimed as an Executive, Administrative, and/or Professional employee, examples of exempt duties include hiring and firing employees, scheduling employees, determining credit policies, formulating personnel policies, assessing employee performance, determining staffing levels, and making company investment decisions. Examples of non-exempt duties include driving vehicles, operating machinery, bookkeeping, repairing equipment, delivering merchandise, sweeping floors, typing and filing, telemarketing, cashier work and preparing food.

Job descriptions and job titles are not determinative of exempt or non-exempt status. The employee’s actual job duties are controlling in determining an exemption, and a job description or job title may not accurately reflect the employee’s actual duties.

The Salary Test
With few exceptions, employees must also be paid on a salaried basis in order to be exempt. In other words, employees must receive a consistent salary, regardless of the hours worked. 

In July 2001, Connecticut revised its regulations on the salary basis test to bring them in line with the federal regulations. In general, exempt employees must be paid in full for any week in which they perform any work. However, the following exceptions are recognized:

  • The salary paid for the employee’s first and last week of work may be prorated to reflect the time actually worked;
  • Deductions may be made for one or more full days if the employee is absent for personal reasons other than sickness or accident;
  • Deductions may be made for one or more full days of sickness or disability, provided it is done pursuant to a bona fide plan, policy or practice of making such deductions after sickness or disability leave has been exhausted and the employee has been notified of the plan, policy or practice;
  • Deductions may be made for absences for less than one day taken pursuant to state or federal FMLA;
  • Deductions may be made for one or more full days if the employee is absent as a result of a disciplinary suspension for violating a safety rule of major significance relating to the prevention of serious danger to the employer’s premises or to other employees.

Reducing a salary in any week that an employee actually performs work, except under these limited exceptions, may result in losing the exemption retroactively.

 As noted, simply placing an employee on salary does not automatically make him/her exempt. In order to be exempt, the employee in question must also meet the “duties” test described above. If an employee is paid on a salary basis, but does not perform exempt duties, the employee would be considered a salaried nonexempt employee and would be subject to the record keeping, minimum wage, and overtime provisions of the state and federal laws.

For additional details on the specific exemptions, please see:

Enforcement
 The exemptions from the minimum wage and overtime laws are narrowly construed. If an employee’s status is questioned, the state and federal Departments of Labor start with the presumption of non-exempt status. The employer bears the burden of proof to demonstrate that an exemption is applicable.

If an employee has been classified as exempt, but the Department of Labor determines that the employee is nonexempt, the employer can be liable for lost wages (in most cases, overtime that was not paid). The employee may be able to recover twice the full amount of wages owed, plus costs and attorneys’ fees. The employer may also face fines and possible imprisonment. Because the employer may not have detailed records concerning the hours worked by the employee, the Department of Labor may rely on the employee’s recollection or notes concerning the hours worked.

In a questionable or borderline case, it generally is better to err on the side of classifying the employee as non-exempt.

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