Published by MoASBO, August 2013
As non-certified staffs grow while budgets continue to shrink, many school districts are looking at ways to cut expenses while accommodating an increase in student and staff needs. One way districts are doing so is that they are looking to gain predictability in payroll by requiring all staff to go onto a salary-basis for compensation – meaning that employees, regardless of how many hours worked, receive a flat rate of compensation each pay period.
While annualizing pay, or placing an employee “on salary,” is not illegal, districts must still comply with applicable wage and hour laws. Namely, if an employee is not exempt from the overtime laws, they must still keep accurate records of time worked, be paid their minimum guaranteed hourly rate for every hour worked up to the 40-hour threshold, and be paid time and a half for every hour worked over forty hours in a workweek.
Contrary to popular belief, few employees are actually exempt from receiving overtime. The federal statute governing wages and hours, the Fair Labor Standards Act (FLSA), provides for overtime for all eligible non-exempt employees, and determines employee classifications, depending generally on (a) how much they are paid, (b) how they are paid, and, (c) what kind of work they perform.
With few exceptions, to be considered exempt, an employee must (a) be paid at least $23,600 per year ($455 per week), (b) be paid on a salary basis (have a “guaranteed minimum” amount of money he/she can count on receiving for any work week in which he/she performs work), and also, (c) perform exempt job duties. Most employees must meet all three prongs of the test in order to be exempt.
Of these three requirements, the most fact-sensitive is the third – that the employee must “perform exempt job duties.” Whether an employee falls into this category is determined on what job duties they perform, as evidenced by his or her job description. There are three typical categories of exempt job duties: “executive,” “professional,” and “administrative.”
The first category, “executive,” requires that the employee regularly (i.e. spends at least half his/her time) supervises two or more other employees, has management as the primary duty of the position, and has some genuine input into the job status of other employees (such as hiring, firing, promotions, or assignments). Employees who have this genuine input into the job status of other employees will participate in interviewing, selecting, and training employees; setting rates of pay and hours of work; appraising productivity; handling employee grievances or complaints, or disciplining employees; determining work techniques; planning work and apportioning work among employees; determining the types of equipment to be used in performing work, or materials needed; planning budgets for work; monitoring work for legal or regulatory compliance; and, providing for safety and security of the workplace.
The second category, “professional,” includes all of the traditional “learned professions,” including teachers, registered nurses, accountants (but not bookkeepers), and other employees who perform work requiring “advanced knowledge” traditionally associated with such learned professions. Their work is predominantly intellectual, requires specialized education, and involves the exercise of discretion and judgment. Professionally exempt employees must have education beyond high school, and usually beyond college, in fields that are distinguished from the mechanical arts or skilled trades. Most commonly, this is evidenced by such an employee’s advanced degree.
Finally, the third category, “administrative,” includes duties which are office or nonmanual work, but which are directly related to management or general business operations of the employer. Such an employee must be regularly required to exercise independent judgment and discretion about matters of significance. Examples of administrative functions include labor relations and personnel (human resources employees), payroll and finance (including budgeting and benefits management), records maintenance, accounting and tax, legal and regulatory compliance, and some computer-related jobs (such as network, internet and database administration).
Only employees who are truly exempt under the FLSA standards may truly be paid on a flat, or salary basis, without regard to the number of hours worked. Therefore, it is imperative to ask yourself whether the employee has the authority to formulate or interpret district policies; how major the employee’s assignments are in relation to the overall operations of the district; whether the employee has the authority to commit the district in matters which have significant financial impact; and, whether the employee has the authority to deviate from district policy without prior approval. After going through this inquiry, it is clear that many of the employees who are regularly placed “on salary” are not exempt, and therefore must keep time cards and be paid for the hours they actually work.
For more assistance on determining whether your staff is exempt from timekeeping and overtime requirements, please contact legal counsel.
© 2013 Mickes Goldman O’Toole, LLC
