Are Temporary Workers Ever Exempt from the FLSA?
By Reggie Gay
Can temporary employees be hired as exempt employees or weekly salaried employees?
This question provides a good opportunity to discuss several issues related to temporary employees, salaried employees, and exempt employees. Due to the nature of temporary employees’ work, they are normally classified as nonexempt and are paid on an hourly basis. Nothing, however, prevents them from being paid on a salary basis or being exempt from the Fair Labor Standards Act (FLSA), provided all of the requirements are met.
Keep in mind the term “temporary employees” may mean different things to different people. They can include traditional short-term, clerical-type employees as well as longer-term employees provided by third-party leasing firms.
A temporary employee can also mean a worker who is hired directly by the company to work for a short, specific period or for a specific project. You should be aware that even if the worker is considered to be an employee of the third-party leasing firm, depending on a number of factors, she may be considered an employee of both the leasing firm and your company.
The ultimate test is the right of control over her. The more control you have over the employee, the more likely you are to be found to be a co-employer. This could potentially expose you to liability if she is improperly classified and not paid overtime.
Regardless of the type of temporary employee, a worker is either exempt or nonexempt under the FLSA. If she is nonexempt, she will be entitled to overtime pay for any hours actually worked over 40 in a single workweek. Although there are a few exceptions, the general rule is that employees must meet three tests before they are exempt from the FLSA—the salary test, the salary-level test, and the duties test.
A salaried employee receives a regular, predetermined amount of compensation each pay period. With limited exceptions, to qualify as exempt, she must be paid on a salary basis, and her compensation cannot be reduced because of variations in the quality or quantity of the work performed. Care must be taken not to inadvertently convert a salaried employee to an hourly employee by improperly deducting pay.
It’s important to understand there’s a difference between the employee being salaried and being exempt. Being salaried isn’t the equivalent of being exempt. The two terms are not interchangeable. While an employee must generally be salaried to be exempt, this isn’t the only test. To be exempt, she must also meet the salary-level and the duties tests.
Currently, the minimum salary-level test is $455 per week ($23,660 per year). That is the minimal amount an employee must earn to qualify as exempt. The U.S. Department of Labor (DOL) has issued a proposed rule that will most likely increase the minimal salary level next year to $679 per week ($35,308 per year). Failing to pay the minimum level will entitle the employee to overtime.
In addition to the above, the worker must also meet the duties test. She cannot primarily be engaged in manual or “blue-collar” work and must fall into one of several “white-collar” exemptions. The exemptions include the executive exemption, the administrative exemption, the professional exemption, the outside sales exemption, the creative professional exemption, and the certain computer employees exemption.
There are specific requirements for each exemption that must be met, and you should be sure her duties and responsibilities fall within one of the exemptions. Remember, her job title is irrelevant, and her primary duties in the performance of her work are what is important.
In summary, although temporary employees may be assigned work that might otherwise allow them to be classified as exempt, most are paid on an hourly basis or do not meet the salaried threshold level. Accordingly, they aren’t eligible for exempt status. If she is paid on a salary basis, meets the threshold amount, and performs work that meets one of the exempt classifications, she will qualify as being exempt from the FLSA and not be entitled to overtime.
Reggie Gay, an attorney with Burr & Forman and editor South Carolina Employment Law Letter.