The laws that cover issues of exempt and non-exempt status of salaried employees are as follows, and the laws that provide for higher or stricter standards will apply:
- CT State Statute 31-60
- CT State Statute 31-58 - exempt employees not covered by minimum wage or record keeping laws.
- CT State Statute 31-76i - exempt employees not covered for the purpose of overtime payment.
- Sections 31-60-14, 31-60-15, and 31-60-16 of the Administrative Regulations, which cover definitions of executive administration and professional employees.
- Title 29, Part 541, Code of Federal Regulations of the Fair Labor Standards Act (FLSA) is a federal law that exempts executive, administrative and professional employees. FLSA covers employers engaged in interstate commerce and gross volume of $500,000.00 in sales.
- FLSA covers employers engaged in interstate commerce and gross volume of $500,000.00 in sales.
The two critical areas that must be considered when determining Exempt Status are the Duties Test and the Salary Test:
Duties Test - the leading factor in determining an exemption is what job duties the employee actually performs on the job. The Job Description (or Job Title) is usually of limited value because it often represents the employer's idealized perception of what job duties a particular employee is supposed to do, when in reality the job duties the employee actually performs are much different.
Duties are generally divided into either exempt or non-exempt duties:
Examples of non-exempt duties: driving vehicles, operating machinery, bookkeeping, repairing equipment, delivering merchandise, sweeping floors, typing, filing, telemarketing, cashier work, preparing food.
Examples of exempt duties: hiring, firing employees, scheduling employees, determining credit policies, formulating personnel policies, assessing employee performance, determining staffing levels, making company investment decisions.
IMPORTANT NOTE: in the exempt duties group, the employee needs to use discretion and judgment on a regular basis. For example, an ordinary bookkeeper may be described by an employer as one who determines credit policy when in fact, he or she merely deals with delinquent accounts in accordance with general guidelines by management. This kind of bookkeeper would not be considered exempt because he or she does not exercise discretion and judgment on a regular basis.
Further, employers may think that if an employee performs any exempt duty, however insignificant, they can be classified as exempt. It is important that in order to be classified as exempt, the employee's primary duty must be to perform tasks of an exempt nature.
SUMMARY OF EXEMPTION REQUIREMENTS
Executive, Administrative, and Professional Exemptions
1. Executive Exemption
- The employee's primary duty must consist of the management of the enterprise or department in which employed.
- The employment must customarily and regularly direct the work of two or more other employees.
- The employee must be paid a salary basis of $475.00 per week ($455.00 under FLSA).
If an employee does not meet these requirements, then the following criteria must be met:
- All the above and a salary of $400.00 per week.
- The employee either must have the authority to hire or fire employees or make recommendation regarding hiring, firing, promotion or other changes in the status of employees.
- The employee must customarily and regularly exercise discretionary powers.
- The employee must not devote more than 20% (or 40% in the case of a retail or service employee) of his hours in the workweek to activities that are not directly and closely related to the performance of the work described above.
2. Administrative Exemption
- The employee must be compensated on a salary basis of $475.00 per week.
- The employee's primary duty must be the performance of office or non-manual work directly related to management policies or general business operations, or the performance of administrative functions in an educational setting in work directly related to academic instruction or training.
- The employee must customarily and regularly exercise discretion and independent judgment:
- an employee under the constant direction of supervisors is not likely to be exercising the degree of discretion contemplated by the exemption.
- the key question in determining the amount of discretion exercised by the employee, is whether the employee is making the decisions independently or whether he is simply following an established procedure.
- even though an employee has significant discretion in judgment, if the discretion applies to the production process, the employee will not qualify under the administrative exemption. The employee must exercise discretion in respect to the company's policies or operations to qualify for this exemption.
- The employee must:
- regularly and directly assist a proprietor, or employee employed in a bona fide executive or administrative capacity; or,
- perform under only general supervision along specialized or technical lines requiring special training, experience or knowledge; or,
- execute under only general supervision special assignments or tasks;
- the employee does not devote more than 20% (40% for retail or service establishment employees) of his hours worked in a week to activities not directly and closely related to the performance of the work described above; provided an employee who is compensated on a salary or fee basis at a rate of not less than four hundred seventy-five dollars per week, exclusive of board, lodging, or other facilities, and whose primary duty consists of the performance of work described above, which includes work requiring the exercise of discretion and independent judgment, shall be deemed to meet all of the requirements of this section.
3. Professional Exemption
- The employee must be compensated on a salary basis of $475 per week except lawyers, doctors, and teachers.
- The employee's primary duty must be:
- work requiring knowledge of an advanced type in a field of science or learning customarily acquired by the prolonged course of specialized intellectual instruction and study as distinguished from a general academic education or apprenticeship; or
- original and creative work in an artistic field; or
- teaching, tutoring, instructing or lecturing as a teacher certified in the school system or educational establishment by which he is employed;
- The employee's work must require the consistent exercise of discretion and judgment;
- The employee's work must be:
- predominantly intellectual and varied in character as opposed to routine, mental, mechanical or physical work; and
- of such character that the output produced or the result accomplished cannot be standardized in relation to a given period of time.
Conclusion
- Although exemptions under Connecticut law no longer tie to FLSA, Part 541 is useful as a guideline in looking at criteria for exemption.
- Job titles should not be the sole criteria for claiming exemptions and certainly not simply paying on a salary.
- Each employment situation is looked at on a case by case basis.