DOL Confirms Exempt Employees May Receive Additional Hourly Pay

The U.S. Department of Labor confirmed that an employer may pay a salaried exempt employee extra hourly compensation for additional work without losing the employee’s exempt status. In a recent opinion letter the DOL addressed a dual-role arrangement in which an employer permitted exempt salaried employees to occasionally perform separate nonexempt work and then paid them on an hourly basis for that additional work.

The Question

The facts presented in the DOL opinion letter involved an academic medical center with nursing Specialists classified as salaried exempt employees under the Fair Labor Standards Act (“FLSA”). Some of those employees voluntarily picked up weekend shifts as Staff Nurses, a separate hourly-paid nonexempt position. The Specialists continued to work about 40 hours per week in their exempt Specialist roles and occasionally added one or two 12-hour nursing shifts. The employer paid them hourly for the additional Staff Nurse work, on top of their regular salary. The practical question presented to the DOL: does hourly pay for the extra work cause the salaried exempt employees to lose their overtime exemption?

DOL Concludes Additional Hourly Compensation Is Permissible

The DOL concluded that this arrangement did not defeat the employees’ exempt status under the facts presented. There were two facts supporting the conclusion. First, the exempt employee continued to receive the required guaranteed salary. The employee always received the required predetermined salary even if the employee performed the additional hourly work and the salary met the minimum amounts established by the FLSA. The employer treated the hourly amount as additional compensation, not a replacement for any part of the guaranteed salary.

Second, the employee remained exempt under the executive, administrative, or professional exemptions, because the employee satisfied the applicable duties test. Under the facts presented to the DOL, the employees continued to spend a majority of their working time performing their exempt Specialist duties. The additional Staff Nurse shifts accounted for 23% to 38% of their total weekly working hours. The DOL found that the employees’ primary duty remained exempt work.

What About Overtime?

If the employee remains properly classified as exempt, the additional nonexempt work does not, alone, create an overtime obligation. Proper classification may switch from exempt to non-exempt if the secondary work increases to the point that the employee’s primary duty is no longer exempt work. If the exemption no longer applies, the employer may face overtime exposure.

Employer considerations:

Before paying exempt employees’ additional compensation in the form of hourly pay, employers should:

• Confirm that the employee is properly classified as exempt from the overtime requirements of the FLSA.
• Keep the employees’ full guaranteed salary in place, without regard to whether the employee performs any additional hourly work.
• Treat hourly payments as extra compensation, not as part of the guaranteed salary.
• Keep the exempt position and the secondary nonexempt assignment clearly distinct.
• Monitor the amount and nature of the secondary work so it does not overtake the employee’s primary exempt duty.
• Revisit the arrangement periodically, especially if the employee begins working more secondary hourly shifts.

Employers may pay a salaried exempt employee additional hourly compensation for extra work, but only if the salary and duties requirements remain satisfied. Pray Walker is available to assist employers in reviewing the compensation and duties requirements for positions exempt from the overtime and minimum wage requirements of the FLSA.

If you have a question about this opinion letter or other employment questions, contact Kevin P. Doyle at kdoyle@praywalker.com.