NOVA Legal Beat: Do I Make Too Much to Earn Overtime?

Editor’s Note: This sponsored column is written by Mathew B. Tully of Tully Rinckey PLLC, an Arlington firm that specializes in federal employment and labor law, security clearance proceedings, and military law.

Q. Is it possible for a white-collar worker to earn too much annually to qualify for overtime wages?

A. The Fair Labor Standards Act (FLSA) requires employers to pay employees not exempted from the law at a rate of at least time-and-a-half for periods worked in excess of 40 hours during a workweek. The law does exempt certain professional, administrative, executive, computer, and outside sales employees, meaning they can work over 40 hours during a workweek and not qualify for overtime wages.

While an employee’s duties, authority, and skill level will largely influence his or her FLSA status, compensation is another factor that needs to be considered. First of all, employees cannot be considered exempt if they are paid on a salary or fee basis not less than $455 per week, or $23,660 annually. It should be noted that news reports have indicated the Obama administration may attempt to change this minimum income exemption threshold by executive order.

At the other end of the wage spectrum, employees who make $100,000 or more annually are generally considered exempt employees. The hard part is figuring out the FLSA status of employees who fall within these two income levels.

The FLSA “was meant to protect low-paid rank and file employees, not higher-salaried managerial and administrative employees who are seldom the victims of substandard working conditions and low wages,” the 4th U.S. Circuit Court of Appeals said in Counts v. South Carolina Electric & Gas Company. This case involved 17 utility company employees who sued for unpaid overtime wages. They earned between $52,000 and $65,000 annually, and the court noted that “[h]igher earning employees such as the plaintiffs are more likely to be bona fide managerial employees.”

Similarly in Darveau v. Detecon, Inc. (2008), the 4th Circuit said that an employee who held the position of director of sales and had an annual compensation of $150,000 “satisfies the salary requirement.” However, it added that “salary alone is not dispositive under the FLSA.” Other factors that need to be considered, so far as determining bona fide administrative employee status goes, are whether the primary duty of the employee is “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” and whether his or her “primary duty includes the exercise of discretion and independent judgment with respect to matters of significance,” the court said, citing U.S. Department of Labor regulations.

Employees and employers should consult with an experienced private sector employment law attorney to determine when overtime wages should be paid.

Mathew B. Tully is the founding partner of Tully Rinckey PLLC. Located in Arlington, Va. and Washington, D.C., Tully Rinckey PLLC’s attorneys practice federal employment law, military law, and security clearance representation. To speak with an attorney, call 703-525-4700 or to learn more visit fedattorney.com.