Advice & Resolution Corner:  Understanding “Salaried Non-Exempt” Pay

Document created by 1002070 on Feb 9, 2015Last modified by 1002028 on Feb 16, 2015
Version 1Show Document
  • View in full screen mode

Pat Rountree.jpgQuestion:

 

What is the definition of salaried non-exempt?

 

Answer:

 

Salaried non-exempt is not defined in North Carolina or Federal Wage and Hour laws, and the use of the term has different meanings depending on the arrangement for pay with an employee. Employees who do not meet the Fair Labor Standards Act (FLSA) duties and salary tests for exemption from minimum wage and overtime, are referred to as non-exempt.  Non-exempt employees must receive the minimum wage for all hours worked and overtime over 40 unless they are covered under a special industry or occupational exemption   http://www.dol.gov/elaws/esa/flsa/screen75.asp. They may be paid hourly or paid a salary as long as those conditions are met.

 

The FLSA does define one form of salaried non-exempt pay in the regulations - salary for a fluctuating workweek.  This method permits a salary to cover all hours worked, whether few or many when the hours vary from week to week.  If the agreement at hire is that the employee will be paid a salary to cover all hours worked (rather than a predetermined set number), the employer may not make deductions for absences occasioned by the employee.  Overtime is still due over 40 hours though under the fluctuating method you only pay the employee .5 times the regular rate for overtime hours since the weekly salary covers all hours worked.  The advantage to the employee is the set salary that does not fluctuate.  The advantage to the employer is a lower overtime rate.  An important caveat is that the employee can never work more hours than would drop the regular rate of pay below minimum wage.     [Note: The Department of Labor has taken the position that a set schedule of fluctuating hours does not meet the requirements of this pay method.]

 

Another example of salaried non-exempt is to pay an employee a salary to cover a specified number of hours (more, equal to or less than 40) (i.e. a predetermined set number of hours).   Although overtime would be due over 40 hours, the regular rate would depend on the salary and the number of hours it is specified to cover. Under this arrangement, if the employee works less than the agreed upon hours, the employer is only required to pay the employee for the actual hours worked.

 

The important things to remember are - you must have non-exempt employees keep records of hours worked, they must be paid minimum wage for all hours worked, and they must receive overtime for hours worked over 40.  The regular rate will be determined by the way they are paid.

 

For more information, attend the Advice & Resolution Corner Plus webinar scheduled for February 25 from 8:30 am until 9:00 am. You can self-register for this webinar at https://attendee.gotowebinar.com/register/2699847867887241729.

Attachments

    Outcomes