Federal labor laws for salaried employees do offer some protections. The minimum wage and overtime requirements of the Fair Labor Standards Act (FLSA) apply to all employees who come within that law's coverage, whether the employees are paid hourly or they are on a salary. The "white collar" exemption to the FLSA does exclude some salaried employees from the law's protections, but only if the employees' work duties meet the tests listed in the FLSA and accompanying regulations. The National Labor Relations Act (NLRA) does not refer to salaried employees, but does specify that professional employees come within the coverage of the federal collective bargaining law. The NLRA does not require employers to bargain collectively with supervisory employees.
Fair Labor Standards Act: Minimum Wage
The Fair Labor Act is a federal wage law that sets the federal requirements for employee wages and work hours. The FLSA requires employers to pay their employees the specified federal minimum wage, although some states require a minimum wage higher than the federal level. Although the FLSA's minimum wage requirement is expressed as an hourly rate, the law does not exclude employees who are paid in some other way. If employees are paid a salary, or at at piecework rate, or if employees' pay includes tips, they are still entitled to receive pay that is the equivalent of the FLSA's minimum hourly wage rate. Labor laws for salaried employees are often different than those that apply to hourly employees.
FLSA: Overtime Pay
The FLSA also states that employees must be paid overtime at the rate of at least
1 1/2 times the employees' regular pay rate for all hours worked in excess of 40 hours in a work week. The regular rate of pay for salaried employees is calculated by dividing the salary by the total number of work hours for which the salary provides compensation. For example, if an employee receives a weekly salary of $450 and works 45 hours per week, the employee's regular rate of pay is $10 per hour. In addition to the weekly salary, the employee must receive overtime pay (an additional $5 per hour) for the five overtime hours in the work week.
White Collar Exemption
The FLSA exempts certain "white collar" workers from the federal minimum wage and overtime labor laws. Exempt from FLSA coverage are executive, administrative, professional and outside sales employees, as well as some skilled computer employees. For the exemption to apply, the employee generally must be paid on a salary basis at a rate of at least $455 per week. The employee's actual work duties must also meet all the tests listed in the FLSA and the accompanying regulations issued by the U.S. Department of Labor. For example, an exempt executive employee must not only be paid on a salary basis, but must also have work duties that involve managing a business, directing the work of other employees and having the authority to hire or fire employees. It is often difficult for salaried employees to receive overtime pay.
Highly Compensated Employees
The U.S. Department of Labor revised the regulations for the FLSA's white collar exemption in 2004 to provide a streamlined exemption test for employees who are paid on a salary or fee basis, and earn at least $100,000 per year. Such highly compensated employees are exempt from the overtime labor law if their duties meet at least one of the work duty tests listed in the regulations for exempt executive, administrative or professional employees.
No FLSA Requirements
Although the Fair Labor Act contains specific minimum wage and overtime requirements, the law does not set federal labor standards on a number of employment issues for either hourly workers or salaried employees. For example, the FLSA's provisions do not require premium pay for working on weekends or at night, do not set a maximum number of work hours per week, and do not address issues such as severance pay, vacations, sick leave, lunch breaks or pay increases.
National Labor Relations Act
The National Labor Relations Act is the U.S. labor law that governs collective bargaining between an employer and its employees' bargaining representative. Supervisory employees are expressly excluded from the NLRA's coverage. In other words, the NLRA does not require an employer to bargain with a representative of its supervisory employees. The NLRA's definition of a supervisory employee does not refer to whether the employee is paid on an hourly or salary basis. Instead, a supervisor is defined as an individual who has the authority to hire, fire or discipline other employees.
Professional employees do come within the coverage of the NLRA. The definition of professional employee in the NLRA does not turn on whether an employee is paid on a salary or hourly basis. Instead, the professional employee definition is based on the employee's work duties, as well as the type of training and education the employee has received. The NLRA states that professional employees and nonprofessional employees will not be placed in the same unit or group for bargaining collectively with their employer unless a majority of the professional employees vote to be included in such a collective bargaining unit.