Fair Labor Standards Act Exemptions

Mike King
January 3, 2012 — 1,754 views  
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The federal Fair Labor Standards Act ("FLSA") was initially passed in 1938 to ensure that covered employers abide by a number of fair labor standards, including overtime pay.  To avoid penalties, an employer must properly classify its employees as "exempt" or "nonexempt."  Exempt employees are not paid overtime.  Non-exempt employees must be paid overtime at one and one-half times their regular rates of pay.  If you do not classify these employees correctly, you could be ordered to pay employees back overtime wages, penalties, interest, and any attorneys' fees the employees incur in collecting these amounts. 

Why should an employer care whether its employees are "learned professionals" for purposes of the FLSA?

The Fair Labor Standards Act includes a specific exemption from overtime pay requirements for "any employee employed in a bona fide executive, administrative, or professional capacity."  Unless the "learned professional" exemption or some other exemption applies, employers must pay overtime compensation for all hours worked in excess of 40 hours in a week.  If an employer gets this wrong, it will cost a ton of money! 

Pay attention!  People really get nailed for violating the FLSA!

Let's take a look at what the Secretary of Labor is doing to the State of Washington's Department of Social and Health Services.  In September, 2011, the Ninth Circuit Court of Appeals ruled that the Secretary of Labor could proceed with a lawsuit alleging that Washington's Department of Social and Health Services had failed to pay overtime compensation to social workers in violation of the Fair Labor Standards Act.  Solis v. State of Washington, Dept. of Soc.& Health Servs. (Sept. 9, 2011, 9th Cir. Ct. of App.). 

So, what will this cost the State of Washington?  Probably a lot of money!  The Ninth Circuit doesn't say in its opinion, but the State of Washington probably has been classifying its social workers as "learned professionals" for a very long time.  Given the nature of social work, the workers probably consistently worked more than 40 hour weeks.  While I don't know the number of social workers employed by Washington's Department of Social and Health Services, I suspect the Secretary of Labor wants to deliver a very large bill!

What are the rules for "learned professional" exemptions to apply?

Under the Department of Labor regulations, an "employee employed in a bona fide professional capacity" is an employee whose main duties require "knowledge of an advanced type in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction."  To see if someone fits this description, you need to look at three things:

1.         Does the employee's work require advanced knowledge?

2.         Is the advanced knowledge required in a field of science or learning?

3.         Is the required advanced knowledge customarily gained through a prolonged course of specialized intellectual instruction?

The regulations further clarify:

[T]he learned professional exemption is not available for occupations that customarily may be performed with only the general knowledge acquired by an academic degree in any field, with knowledge acquired through an apprenticeship, or with training in the performance of routine mental, manual, mechanical or physical processes.

You cannot be a learned professional for purposes of the exemption if you acquired your skills through experience rather than special "intellectual instruction." 

So how do we apply this regulation to make sure that we are following the FLSA in classifying exempt employees? 

In the Washington Department of Social and Health Services case, social workers did not qualify for the exemption.  While we think paralegals are learned professionals, they are generally non-exempt employees and do not qualify for the learned professional exemption.  Practical nurses are also generally not learned professionals. 

On the other hand, medical technologists, registered nurses, dental hygienists, and chefs who meet certain education requirements, are generally exempt. 

Because the penalties can be so high, the regulations make it imperative to evaluate the way in which you classify your employees.  You should review job descriptions and salary structures and make changes, if necessary, to ensure that employees being treated as exempt are truly exempt. 

Please call me if you have any questions or need assistance updating your employment policies or complying with the Fair Labor Standards Act. 

Mike King

Gammage & Burnham PLC

Michael R. King is a founding partner of Gammage & Burnham, P.L.C., a Phoenix law firm with diverse areas of emphasis. His practice primarily centers around bankruptcy and creditors' rights, commercial litigation, including uniform commercial code cases, and real estate and business law. Mr. King is a former of the Creditor/Debtor Rights Committee and is a current member of the Bankruptcy, Real Estate and Construction Law Sections of the State Bar of Arizona. He is the past chair of the Board of Trustees of the Maricopa County Bar Foundation. Mr. King is an active alumnus of The University of Arizona, where he received his B.A. and J.D. degrees, with distinction and high distinction.