Have COVID-19 Business Changes Turned Your Exempt Employees Nonexempt?

With all the reductions in force and changes necessitated to employee pay, and duties brought on by COVID-19, pause and consider – are your exempt employees still exempt under the federal Fair Labor Standards Act (FLSA)?

Most exemptions fall under the three main FLSA White-Collar Exemptions:  executive, administrative, or professional.  Such employees have to be paid a guaranteed salary of at least $684 per week and have to perform specific duties.  Here are three questions to consider regarding whether your exempt employees are still exempt:

  • Have you reduced the amount you pay your exempt employees?  Exempt executive, administrative, and professional employees must be paid at least $684 per week.  If you have reduced pay, make sure these exempt employees’ compensation has not fallen below the $684 mark.  (This is amount cannot be pro-rated for part-time exempt employees.  It is a hard line; to be exempt, employees must earn at least $684 per week no matter how few hours the employee works.)
  • Have you changed the duties that your exempt employees perform?  Exempt executive, administrative, and professional employees must perform specific duties to be exempt, and these duties must be their “primary duty.”  According to the U.S. Department of Labor,
    • The term “primary duty” means the principal, main, major, or most important duty that the employee performs. Determination of an employee’s primary duty must be based on all the facts in a particular case, with the major emphasis on the character of the employee’s job as a whole. Factors to consider when determining the primary duty of an employee include, but are not limited to:
      • the relative importance of the major or most important duty as compared with other types of duties;
      • the amount of time spent performing the major or most important duty;
      • the employee’s relative freedom from direct supervision; and
      • the relationship between the employee’s salary and the wages paid to other employees for the performance of similar work.
      • The amount of time spent performing the specific duty can be a useful guide in determining whether such work is the primary duty of an employee. Thus, employees who spend more than 50 percent of their time performing a specific duty will generally satisfy the primary duty requirement. Time alone, however, is not the sole test, and nothing requires that exempt employees spend more than 50 percent of their time performing a specific duty. Employees who do not spend more than 50 percent of their time performing their major or most important duty may nonetheless meet the primary duty requirement if the other factors (listed above) support such a conclusion.
    • If you have changed the duties of your exempt employees, the concern is that their primary duties may no longer be the required exempt duties.  As such, we recommend you that you review Employers Council’s FYI specifying the duties required for the executive, administrative, and professional exemptions and ensure that the new configuration of duties still qualifies your employees to be exempt. You can also call Employers Council staff to discuss this; we are happy to help.
  • Have you terminated employees or moved employees around?  One of the requirements for an exempt executive employee is that they direct the work of two or more full-time equivalent employees.  Terminations or reorganizations may have impacted this.  As such, if you have exempt executive employees, we recommend you evaluate whether they continue to supervise the required number of employees.

FLSA compliance is challenging – even absent the added impact of COVID-19 concerns.  In addition, state laws can add additional requirements for exempt employees beyond those discussed above. Employers Council can help; please contact us with questions.