© 2014 Brigham Young University–Idaho
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© 2008 Brigham Young University–Idaho
FAIR LABOR STANDARDS ACT
Exemptions and Policy
April 2014
© 2014 Brigham Young University–Idaho
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Overview
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Northwestern University Football
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Define “Exempt” and “Non-exempt”
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Exemption Standards for:
 Executive
 Administrative
 Professional
 Computer-Related
 Other
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Current Legal Topics
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Policy Re: Salary Administration
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College Athletes Players Association v.
Northwestern University
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Regional office of the NLRB ruled that scholarship football
players are “employees” and can unionize.
Why?
1) Perform services for the benefit of the University and
receive compensation (scholarship)
2) Subjected to the employer’s control in the performance
of their duties as football players
3) Football duties are unrelated to their academic studies
unlike graduate assistants whose teaching and research
are inextricably tied to their graduate degree
requirements.
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Defining Exempt & Non-Exempt Employees
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Exempt Employees -- Employees who meet one of the FLSA
exemption tests and who are paid on a fixed salary basis and
not entitled to overtime.
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Non-Exempt Employees - Employees who do not meet any
one of the Fair Labor Standards Act exemption tests and are
paid on an hourly basis and covered by wage and hour laws
regarding minimum wage, overtime pay, and hours worked.
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Defining Exempt & Non-Exempt Employees
Exempt
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Administrative Employees
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22 days of vacation accrual
 12 days of sick leave accrual
 No overtime
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Faculty
Non-Exempt
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Staff Employees
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12 days of vacation accrual
initially; increases every 5 years to
15 days, 18 days and 22 days
 12 days of sick leave accrual
 Overtime if work more than 40
hours within a work week

0 days of vacation accrual
 0 days of sick leave accrual
 No overtime
 Contract
Why the difference in vacation accrual between administrative and staff employees?
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FLSA Designation
An Issue of Status?
An Indication of One’s Importance?
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Job Descriptions
The BYU–Idaho Job Description
Serves Multiple Purposes
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FLSA Exemptions
Categories of Exemptions:
• Executive
• Administrative
• Professional
• Computer-Related
• Outside Sales
• Highly Compensated Employee
DOL Field Operations Handbook
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Executive Exemption
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Must be paid at least $455 weekly ($23,660 annually) on a
salary basis.
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Primary duty must consist of managing the company or a
customarily recognized department of the company.
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Customarily and regularly direct the work of two or more fulltime employees or equivalents.
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Has the authority to hire or fire other employees or make
recommendations that carry weight on significant employment
decisions.
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Examples: executive officer, controller, vice president, director.
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Administrative Exemption
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Must be paid at least $455 weekly ($23,660 annually) on a
salary basis.
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Primary duty consists of performing office or non-manual
work directly related to the management or general business
operations of the company.
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Work includes the exercise of discretion and independent
judgment with respect to matters of significance.
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Examples: manager, supervisor, administrator.
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Management or General Business Operations
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Tax
Finance
Accounting
Budgeting
Auditing
Insurance
Quality Control
Purchasing
Procurement
Advertising
Marketing
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Research
Safety and Health
Human Resources
Employee Benefits
Labor Relations
Public and Government Relations
Legal and Regulatory Compliance
Computer Network, Internet and
Database Administration
Professional (Learned and Creative) Exemption
Learned Professional:
• Must be paid at least $455 weekly ($23,660 annually) on a
salary basis. (Teachers, licensed/certified practitioners of law
and medicine, medical interns and residents do not have to
be paid on a salary basis)
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Primary duty consists of the performance of work that
requires advanced knowledge (beyond high school) and that
is primarily intellectual in character and includes the exercise
of discretion and independent judgment.
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Professional (Learned and Creative) Exemption
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The advanced knowledge is in a field of science or learning.
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The advanced knowledge was acquired by a prolonged
course of specialized intellectual instruction (appropriate
academic degree or combination of degree and experience).
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Examples: accountant, nurse, engineer.
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Professional (Learned and Creative) Exemption
Creative Professional:
• Must be paid at least $455 weekly ($23,660 annually) on a
salary basis.
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Primary duty consists of the performance of work requiring
invention, imagination, originality or talent in a recognized
field of artistic or creative endeavor as opposed to routine
mental, manual, or physical work.
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Examples: composer, singer, graphic designer.
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Computer-Related Exemption
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Must be paid at least $455 weekly ($23,660 annually OR at
least $27.63 per hour. (Does not have to be paid on a salary
basis.)
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Primary duty consists of:
• The application of system-analyst techniques and
procedures, including consulting with users to determine
hardware, software, or systems specifications OR…
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Computer-Related Exemption (cont’d)
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The design, development, documentation, analysis, creation,
testing or modification of computer systems or programs,
OR…
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The design, documentation, testing, creation or modification
of computer programs related to machine-operating systems,
OR…
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A combination of these duties which requires the same level
of skills.
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Examples: network analyst, developer, software engineer.
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Seasonal and Recreational Establishments
An FLSA exemption to overtime and recordkeeping
requirements applies if the establishment…
A. does not operate for more than 7 months in any calendar
year, or
B. its average receipts for any six months of such year (not
necessarily consecutive) were not more than 33-1/3 per
centum of its average receipts for the other six months of
such year.
Fact Sheet
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Common Management Arguments
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Greater job flexibility
Easier to manage work schedules
Work requires additional / extended work hours
Status
Responsibilities merit the exemption
Job title = “x”
Other
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Dual-role Employees
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Paycheck Fairness Act
President Obama issued an Executive Order and Presidential
Memorandum to enforce parts of the act because the House was not
expected to vote on it this session.
Would require employers to prove that any gender based pay
discrepancy is “job-related and consistent with business necessity.”
Would restrict flexible employee compensation based on legitimate
factors like:
1) Prior experience
2) Education
3) Negotiation by employees
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Presidential Memorandum
“Modernize and streamline” the “white collar” overtime
exemptions regulations
Fact Sheet:
“Opportunity for All: Rewarding Hard Work by Strengthening
Overtime Protections”
© 2014 Brigham Young University–Idaho
Presidential Memorandum
Secretary of DOL charged to:
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Update existing protections in keeping with the intention of
the Fair Labor Standards Act.
Address the changing nature of the American workplace.
Simplify the overtime rules to make them easier for both
workers and businesses to understand and apply.
© 2014 Brigham Young University–Idaho
Anticipated Changes to FLSA
Possible Changes Include:
Increase Minimum Salary Threshold for FLSA Exemptions
• $455 per week to $970 per week
• $23,660 per year to $50,000 per year
Change the Primary Duties Test
© 2014 Brigham Young University–Idaho
Time to Update the Law
EXAMPLE
Annual Salary: $24,000
Hours Per Week
40
50
60
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Hours Per Year
2,080
2,600
3,120
Hourly Rate
$11.54
$9.23
$7.69
Time to Update the Law
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1938 – The FLSA Becomes Law
1975 – Minimum Threshold: $250 per week
2004 – Minimum Threshold: $455 per week (the equivalent of
$561 in today's dollars)
The current rate is “below today’s poverty line for a worker
supporting a family of four, and well below 1975 levels in
inflation adjusted terms.”
© 2014 Brigham Young University–Idaho
Supplemental Slides
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Occupational Index and Exemption Assistance
Other FLSA Exemptions
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Outside Sales Exemption
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Does NOT have to be paid on a salary basis.
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Primary duty consists of making sales or obtaining orders for
contracts for services or for the use of facilities for which
consideration is paid by a client or customer.
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Customarily and regularly is engaged away from the
employer’s place of business.
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Examples: traveling salespersons, contract negotiators.
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Highly Compensated Exemption
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Highly compensated employees performing executive,
professional or administrative duties:
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Must be paid a total compensation of $100,000 or more
annually which includes at least $455 per week paid on a
salary basis. The $100,000 annually may consist of
commissions, nondiscretionary bonuses and other
nondiscretionary compensation.
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Highly Compensated Exemption (cont’d)
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Customarily and regularly performs at least one of the exempt
duties or responsibilities of the Executive, Administrative, or
Professional Exemption
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Primary duty consists of performing office, non-manual work
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Examples: real estate broker, stock broker.
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Salary Basis Requirement
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To be paid on a salary basis means that the employee
“regularly receives a predetermined amount constituting all or
part of the employee’s salary, which amount is not subject to
reduction because of variations in the quality or quantity of
work performed.”
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Salary Basis Requirement (cont’d)
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In other words, exempt employees must receive their full
salary for any week in which they perform any work without
regard to the number of days worked or how well the job was
performed with the following main exceptions:
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Salary Basis Requirement (exceptions)
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Hourly paid computer professional employees who make at
least $27.63 per hour, doctors, lawyers, teachers and outside
sales employees are exceptions to an exempt white-collar
employee being paid on a “salary basis.
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Specific Prohibited Deductions from Salary
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Partial day absences (employers may pay for these using
paid leave accounts). An exception to this prohibition is when
the exempt employee is on FMLA leave. Actual pay
deductions may be made for partial day FMLA absences.
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Jury duty and military leave unless the employee performs no
work whatsoever during the employer’s standard workweek.
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When no work is available such as during slow periods or
when the business is closed due to weather emergencies.
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Deductions from Salary
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An employee is not paid on a salary basis if deductions from
the predetermined salary are made for absences occasioned
by the employer or by the operating requirements of the
business
If the employee is ready, willing and able to work, deductions
may not be made for time when work is not available
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Permitted Salary Deductions
Seven exceptions from the “no pay-docking” rule:
1. Absence from work for one or more full days for
personal reasons, other than sickness or disability
2. Absence from work for one or more full days due to
sickness or disability if deductions made under a bona
fide plan, policy or practice of providing wage
replacement benefits for these types of absences
3. To offset any amounts received as payment for jury
fees, witness fees, or military pay
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Permitted Salary Deductions
Seven exceptions from the “no pay-docking” rule:
4. Penalties imposed in good faith for violating safety rules
of “major significance”
5. Unpaid disciplinary suspension of one or more full days
imposed in good faith for violations of workplace conduct
rules
6. Proportionate part of an employee’s full salary may be
paid for time actually worked in the first and last weeks
of employment
7. Unpaid leave taken pursuant to the Family and Medical
Leave Act
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