Mar 3

Overtime Pay – What Laws do Montana Employers Follow?


When it comes to determining overtime and wage classifications, the law uses the terms exempt and non-exempt workers. When we say that an employee is “exempt,” we generally mean that the employee is exempt from the protections of a federal law called the Fair Labor Standards Act, and that the employer need not be concerned with paying minimum wage or overtime to that employee. However, the FLSA does make some employees exempt from the overtime requirements while retaining the minimum wage requirement.

Employers do not have unfettered discretion to classify workers in any manner it sees fit. Whether an employer must pay overtime depends on numerous factors, including the amount of control that the employer exercises, the nature of the employee’s job, and the amount of time spent on various tasks. You should contact an attorney experienced in labor law like the McGrady Law Firm if you need assistance navigating this area of the law.

Determining whether an employee is exempt or non-exempt is critical to ensuring compliance with the wage and hour laws. Non-exempt employees are subject to the overtime and minimum wage numerous wage and hour protections provided by the FLSA. Exempt employees are outside the protection of those laws. Erroneous classification in this area could result in substantial fines and costs for wage and hour violations, including costly proceedings and attorneys’ fees for the employee.

The law presumes that all employees are non-exempt and looks with suspicion upon any employee classification identifying the employee as exempt. Merely calling an employee exempt is not enough.

Which classifications are truly exempt? The following classifications are those recognized under the FLSA.

1. Executive exemption

The requirements for the executive exemption are:

• The employee must receive a salary.
• Management of a recognized function, department or subdivision must be the employee’s primary duty.
• The employee must direct the work of two or more other employees.
• The employee must have authority to hire or fire or his or her suggestions and recommendations as to firing, firing, advancement, promotion or other change of status must carry particular weight.

2. Administrative exemption

The requirements for the administrative exemption are:

• The employee must receive a salary.
• The employee must have a primary duty that includes 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 employee must exercise discretion and independent judgment with respect to matters of significance.

3. Professional exemption

Two types of professional qualify for the professional exemption-learned and creative.

A learned professional must have a primary duty that is the performance of work requiring knowledge of an advanced type, including the consistent exercise of discretion and independent judgment in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction. Such employees must earn a salary of at least $455 per week, except that those working in the professions of law,
medicine and teaching do not have to meet the salary basis test.

A creative professional must have a primary duty of performing work requiring invention, imagination, originality or talent in a recognized field of artistic or creative endeavor, as opposed to routine mental, manual, mechanical or physical work and earn a salary of at least $455 per week. The following types of workers generally qualify for the creative professional exemption: actors, musicians, composers, conductors, soloists, artists, essayists, novelists, screenplay writers, those with responsible writing positions in advertising agencies.

4. Highly compensated employees

The Department of Labor regulations contain a special rule for “highly-compensated” workers who are paid total annual compensation of $100,000 or more. The requirements for that exemption are:

• The employee earns total annual compensation of $100,000 or more, which includes at least $455 per week paid on a salary basis.
• The employee’s primary duty includes performing office or non-manual work.
• The employee customarily and regularly performs at least one of the exempt duties or responsibilities of an exempt executive, administrative or professional employee. For example, an employee may qualify as an exempt highly-compensated executive if the employee customarily and regularly directs the work of two or more other employees, even though the employee docs not meet all of the other requirements in the standard test for exemption as an executive.

5. Outside Sales

A sales employee is exempt if

• his or her primary duty is 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; and
• He or she is customarily and regularly engaged away from the employer’s place or places of business.

There is no salary basis requirement.

6. Computer professional

Employees who work in the computer field are exempt if they either satisfy the regular salary basis test or earn an hourly wage of not less than $27.63, and work as a computer systems analyst, computer programmer, software engineer or other similarly skilled worker in the computer field, with a primary duty that consists of:

• application of systems analysis techniques and procedures, including consulting with users, to determine hardware, software or system functional specifications; or
• 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; or
• the design, documentation, testing, creation or modification of computer programs related to machine operating systems; or
• a combination of the aforementioned duties, the performance of which requires the same level of skills.

7. Commissioned employees of retail establishments

These employees are only exempt from the FLSA’s overtime requirement. The minimum wage requirement applies to them. An employee of a retail or service establishment who is paid on a commission basis or whose pay includes compensation representing commissions need not be paid overtime, provided the following conditions are met:

• The commissioned employee’s regular rate of pay of such employee must be more than one and one-half times the minimum wage, and
• more than half his or her compensation for a representative period (not less than
one month) must represent commissions on goods or services.

8. Independent Contractors

Independent contractors work for themselves and not for an employer. Because there is no employment relationship, the FLSA docs not apply. Whether or not a particular individual is an independent contractor depends upon the facts about the relationship, not the characterization given to the relationship by the recipient of the services. Court and enforcement authorities use the following factors to make the determination:

• The extent to which the services rendered are an integral part of the principal’s business.
• The permanency of the relationship.
• The amount of the alleged contractor’s investment in facilities and equipment.
• The nature and degree of control by the principal.
• The alleged contractor’s opportunities for profit and loss.
• The amount of initiative, judgment, or foresight in open market competition with others required for the success of the claimed independent contractor.
• The degree of independent business organization and operation.

The following factors do not matter:
• The place where work is performed
• The absence of a formal employment agreement
• Whether the service provider is licensed by State/local government.
• The time or mode of pay does not control the determination of employee status.

If you believe that your employer is not following these laws, contact the McGrady Law Firm for a free consultation to determine your rights.

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