Q: I own a small consulting firm. We are hiring an account executive to cover an employee’s leave of absence. The staffing firm quoted me a reasonable hourly rate for the regular work week. But they said we are required to pay time and one-half for hours worked over 40 in a single work week. The job is an exempt, professional position. It requires more than 10 years of industry experience and client management skills. I was under the impression that over 40 hours for an exempt position overtime was not required. Am I missing something here or is the staffing firm trying to make a quick buck off of me?
A: The classification of employees is a confusing area of employment law. You are wise to review all classification issues carefully. Employers who misclassify employees have faced significant penalties especially in recent years. Massachusetts recently amended its laws to making treble (triple) damages mandatory for violations of wage and hour laws.
You are correct that the law does not require employers to pay exempt employees time and one-half for those hours worked in excess of forty hours in a given week. However, based on the information provided, I can not confirm that the account executive position you describe is truly exempt from federal and state minimum wage and overtime laws.
I contacted Attorney Jeff Dretler, a partner in Prince, Lobel, Glovsky and Tye's Employment Law Group to provide additional information on the topic. Dretler explains: "In order to be considered exempt, the position must satisfy the criteria for one of the white collar exemptions set forth in the federal Fair Labor Standards Act (FLSA): (1) Executive Exemption; (2) Professional Exemption; or (3) Administrative Exemption. To satisfy any of these exemptions, the employee must be paid on a salaried basis of at least $455 per week and meet the “duties” test of each particular exemption. From the information provided, it appears that the position would not satisfy the Executive or Professional exemptions from the minimum wage and overtime requirements of federal and state law. Assuming the position meets the salary requirements above, the position may satisfy the Administrative Exemption.
Even though you refer to the position as a “professional” position and state that it requires ten years of experience and client management skills, that alone (without specialized academic training) will usually not meet the FLSA test for the Professional Exemption. In order to satisfy the criteria for the Administrative Exemption, the position must have as a primary duty the performance of office or nonmanual work directly related to the management or general business operations of the employer or the employer’s customers. The position must also have as a primary duty the exercise of “discretion and independent judgment with respect to matters of significance.”
Often an account executive position will satisfy the first part of this primary duties test (nonmanual work directly related to the management of the business operations of the employer or its customers), but it is difficult to determine, based on the information provided, if this particular account executive is required to exercise discretion and independent judgment with respect to matters of significance. A title itself is not a factor in the classification process. If the role requires ten years of experience and client management skills, it is possible that the individual will be given sufficient latitude to satisfy the criteria of the Administrative Exemption.
Dretler offers this advice too: "You must be sure, however, that not only do you give your regular employee who is on leave such latitude, but that the same discretion and independent judgment will be required of the person temporarily filling the position. If so, then the account executive position is exempt from the minimum wage and overtime laws. Even if the account executive position is truly exempt, however, the staffing company may have contracted with its employee to pay him or her time and one-half for hours worked over forty in a given week, and is simply passing that contractual obligation on to you. You should discuss this issue with the staffing company to find out the basis for its policy of charging you time and one-half for hours worked over forty in a given week for a position that you believe to be exempt."
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