Barber, Banaszynski & Hiatt, PSC

Exempt Employee Status and Overtime Pay: A Practical Primer
posted by Jessica C. Durden

Employment law is a dense, objectively dry field; it’s not dramatic family law, heart-wrenching criminal law, or high-brow corporate litigation. But for anyone in the working world--blue collar and white collar, hourly and salaried, minimum wage earners and CEOs--employment law has the potential to seriously impact day to day life. For the employer, failure to wade into the morass of employment law to understand its obligations to employees risks the wrath (and the crippling fines) of the Kentucky Labor Cabinet and the U.S. Department of Labor. Failure to investigate and advocate for one’s rights as an employee can leave one with a shorted paycheck and far too many hours on the clock (or too few). This article is intended to address one of the most commonly asked employment law questions: who qualifies as “exempt” (and why does it matter)?

Exempt status is important for a variety of reasons, but most important is overtime. The Fair Labor Standards Act (and Kentucky labor law, see especially 803 KAR 1:060) establishes that non-exempt employees must be paid time-and-a-half for all hours worked in excess of 40 hours in a work week. Note that even a salaried person may be due overtime pay if that individual is non-exempt. A work week is defined as seven consecutive 24-hour periods and does not have to run with a traditional calendar week.

Kentucky Revised Statutes Chapter 337.010(2)(a) specifically lists individuals who are considered exempt from the overtime and minimum wage laws. Those individuals include (but are not limited to):

1. Persons employed in agriculture;

2. Federal employees;

3. Nannies, caregivers, au pairs, etc.;

4. Employees of nonprofit camps operating less than seven months of a calendar year;

5. “Any individual employed in a bona fide executive, administrative, supervisory, or professional capacity . . .”

The last item on the list is most likely to trip up employers and employees alike. What does it mean to be a “bona fide” supervisor, executive, etc.? 803 KAR 1:070 explains standards for each of the four categories listed above. For example, an “executive” is any employee compensated on salary of at least $455.00 per week, exclusive of benefits; whose primary duty is management; who typically manages two or more other employees; and who has the authority to hire or fire other employees or who has power to recommend such action. Similarly, “an individual employed in a bona fide administrative capacity” is one who is compensated on a salary or fee basis of not less than $455.00 per week, exclusive of benefits; whose primary duties are the “performance of the office”; and whose primary duty includes exercising independent judgment on significant office issues.

To simplify, each of those bona fide individuals has to have some measure of actual authority in their workplace. Just because a person’s title is “manager” within a company does not necessarily make them automatically exempt. If, for example, an individual was deemed a shift supervisor but only oversaw one other employee and had no authority or sway in hiring or firing decisions, they are not exempt under Kentucky and federal labor law and would be due overtime pay. If you or someone you know have concerns about overtime pay you believe may be due to you or to one of your employees, contact Jessica Durden at 502.254.2110 to discuss your case.