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Wage and Hour Laws - Are Your Employees Exempt or Non-Exempt?




by:
Rebecka Whitmarsh
Wilentz, Goldman & Spitzer P.A. - Woodbridge Office

 
March 21, 2013

Labor and employment lawyers expect the Department of Labor to increase the number of audits it conducts this year. To protect your business from lawsuits, fines and fees, you should review your exempt and non-exempt job classifications and your wage and hour policies to ensure compliance with both Federal and New Jersey Law.

An exempt employee is an employee who is exempt from the overtime provisions of the Wage and Hour Laws. Improperly identifying non-exempt employees as exempt can result in large damages to the employer, including back overtime wages plus interest (employees who are misclassified are eligible for 2 years of back overtime wages, 3 years if the misclassification is determined to be willful), liquidated damages, attorneys fees and costs, and fines/fees levied by the Department of Labor. Therefore, ensuring that your employees are properly classified is imperative.

The following is a brief overview of the standards for classifying an employee as exempt in New Jersey.

In 2011, the New Jersey Department of Labor and Workforce Development eliminated its definition of exempt employees for overtime purposes, and adopted in its place the federal standard. This simplified compliance for New Jersey employers, and generally broadened the definition of exempt employees for New Jersey employers. Prior to 2011, the New Jersey definition of an exempt employee was more restrictive than the federal standard, thus many employees who were exempt under the federal laws were not exempt under New Jersey laws.

New Jersey’s overtime regulations are found at N.J.A.C. 12:56-7.2. This regulation simply provides as follows:

a. Except as set forth in (b) below, the provisions of 29 CFR Part 541 are adopted herein by reference.
b. Not adopted by reference are those provisions within 29 CFR Part 541 that apply solely to those individuals employed by government employers, including, but not limited to, those individuals employed by State, county and municipal employers, since the definition of the term "employer" within N.J.S.A. 34:11-56a1 does not include government employers. See N.J.S.A. 34:11-56a1 ("employer" includes any individual, partnership, association, corporation or any person or group of persons acting directly or indirectly in the interest of an employer in relation to an employee); See also, Allen v. Fauver, 167 N.J. 69 (2001).
c. "Administrative" shall also include an employee whose primary duty consists of sales activity and who receives at least 50 percent of his or her total compensation from commissions and a total compensation of not less than $400.00 per week.

Pursuant to 29 CFR Part 541, an employee is considered to be exempt from the overtime requirements of the Wage and Hour Law if he or she is an Executive Employee,  Administrative Employee, Professional Employee, Computer Employee, or an Outside Sales Employee.  It is important to note that job title alone is insufficient to determine whether an employee is exempt.  Simply giving someone the title of Supervisor or Administrator is not enough to make that employee exempt.  As such, you should review the actual job duties of your employees to determine whether they should be considered exempt employees.

To be considered an Executive Employee, the employee must earn a salary of at least $455.00 per week, must manage and enterprise or a subdivision/department of the enterprise, must supervise at least two other employees, and has authority regarding employment status of others (i.e. hiring, firing, promotion, demotion).

To be considered an Administrative Employee, the employee must earn a salary of at least $455.00 per week, must perform non-manual work directly related to the management or general business operations of the employer or the employer's customers,  and the employee’s primary duty must include the exercise of discretion and independent judgment with respect to matters of significance.  Note that in businesses covered only by the New Jersey law an inside sales person may also be exempt as an Administrative Employee if the elements of N.J.A.C. 12:56-7.2(c) are met.

To be considered a Professional Employee, the employee must earn a salary of at least $455.00 per week, and must perform work that requires knowledge of an advanced type in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction (learned professionals); or work that requires invention, imagination, originality or talent in a recognized field of artistic or creative endeavor (creative professionals).

To be considered a Computer Employee, the employee must earn a salary of at least $455.00 per week, and his or her job must consist of the following:

  1. The application of systems analysis techniques and procedures, including consulting with users, to determine hardware, software or system functional specifications;
  2. The design, development, documentation, analysis, creation, testing or modification of computer systems or programs, including prototypes, based on and related to user or system design specifications;
  3. The design, documentation, testing, creation or modification of computer programs related to machine operating systems; or
  4. A combination of the aforementioned duties, the performance of which requires the same level of skills.

To be considered an Outside Sales Employee, the employee’s primary duty must be to make sales or obtain orders for services and he/she must perform this primary duty away from the employer’s place of business.
For each of the above classes of exempt employees, the employees are not paid overtime for working over 40 hours in a week.  In addition, their salary cannot be decreased if they work less than 40 hours in a week.  There are certain circumstances in which deductions may be made from an exempt employee’s salary.  If you are considering making a deduction from an exempt employee’s salary, you should speak with a Labor and Employment attorney to determine whether the deduction is valid - an improper deduction could result in a determination that the employee was not an exempt employee.  In addition, you should ensure that your company has adopted a policy that bans improper deductions and provides an avenue to raise complaints.



 

The views expressed in this document are solely the views of the author and not Martindale-Hubbell. This document is intended for informational purposes only and is not legal advice or a substitute for consultation with a licensed legal professional in a particular case or circumstance.
 

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