Alabama, like all other states, adheres to the federal Fair Labor Standards Act (FLSA) when it comes to classifying employees as exempt or non-exempt. This classification significantly impacts an employee's eligibility for overtime pay. Understanding the difference is crucial for both employers and employees in Alabama. This guide breaks down the key distinctions and provides clarity on the complexities of FLSA compliance within the state.
The Core Difference: Overtime Eligibility
The fundamental distinction between exempt and non-exempt employees in Alabama lies in their eligibility for overtime pay. Non-exempt employees are entitled to overtime pay (typically 1.5 times their regular rate) for any hours worked exceeding 40 in a single workweek. Exempt employees are not entitled to overtime pay, regardless of the number of hours worked.
Key Tests for Exempt Status in Alabama
Determining whether an employee is exempt or non-exempt involves several tests, all of which must be met. The FLSA outlines specific categories of exempt employees; it's not sufficient for an employee to simply hold a managerial title. Here are the primary categories and the relevant tests:
1. Executive Employees
To qualify as an exempt executive employee under the FLSA, an individual must meet all of the following criteria:
- Primary Duty: Their primary duty must be managing the enterprise, or a customarily recognized department or subdivision thereof.
- Management Authority: They must customarily and regularly direct the work of two or more other employees.
- Hiring and Firing Authority: They must have the authority to hire or fire other employees, or their suggestions and recommendations as to the hiring, firing, advancement, promotion, or any other change of status of other employees will be given particular weight.
- Salary Basis: They must receive a salary of at least $684 per week ($35,568 annually as of January 2023). This threshold is subject to change.
2. Administrative Employees
To be classified as an exempt administrative employee, an individual must satisfy the following:
- Primary Duty: Their primary duty must be the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer's customers.
- Exercise of Discretion and Judgment: They must exercise discretion and independent judgment with respect to matters of significance.
- Salary Basis: They must receive a salary of at least $684 per week ($35,568 annually as of January 2023). This threshold is subject to change.
3. Professional Employees
This category includes both learned professionals and creative professionals. The requirements vary slightly depending on the specific type. Both require a salary of at least $684 per week ($35,568 annually as of January 2023). This threshold is subject to change.
- Learned Professionals: Requires advanced knowledge in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction.
- Creative Professionals: Requires invention, imagination, originality, or talent in a recognized field of artistic or creative endeavor.
4. Highly Compensated Employees (HCEs)
This category offers a simpler test:
- Salary Basis: They must receive a total annual compensation of at least $107,432, including at least $684 per week paid on a salary basis. This threshold is subject to change.
- Primary Duty: Must customarily and regularly perform at least one of the duties of an executive, administrative, or professional employee.
5. Outside Sales Employees
- Primary Duty: Their primary duty must be making sales or obtaining orders or contracts for services or for the use of facilities for which a consideration will be paid by the client or customer.
- Regularly Engaged Away from the Employer's Place of Business: They must be customarily and regularly engaged away from the employer's place or places of business.
Important Considerations for Alabama Employers
- Staying Updated: The salary thresholds for exempt employees are periodically reviewed and adjusted by the Department of Labor. Employers must stay current on these changes to ensure compliance.
- Careful Classification: Incorrectly classifying an employee can lead to significant legal and financial penalties.
- Documentation: Maintain thorough and accurate records of employee compensation and job duties to support exemption claims.
- Seeking Legal Advice: When in doubt, consult with an employment law attorney to ensure compliance with the FLSA and to avoid potential legal issues.
This guide provides a general overview. The specifics of FLSA compliance can be intricate, and it's essential to consult the official Department of Labor resources and legal professionals for definitive answers regarding specific situations. This information is for general guidance only and does not constitute legal advice.
