as
published in the Western Business Journal)
Business owners must be careful in classifying an employee as a salaried employee rather than an employee paid by the hour because they can face severe penalties if they fail to pay overtime wages to eligible employees. With some exceptions (a few are noted below), Montana law provides that no employer may hire an employee to work more than 40 hours unless the worker receives 1.5 times the regular hourly rate for overtime. An employer who fails to pay an e ligible employee the appropriate overtime wages faces stiff penalties. In addition to owing the unpaid wages, the employer is subject to a penalty up to 110 % of the unpaid wages and the payment of any court costs and attorney’s fees incurred by the employee.
While the potential costs of mistakenly categorizing an employee are great, there are several exemptions from the rule requiring overtime wages. For example, most farm workers are specifically exempted from Montana’s overtime laws, as are nannies and many types of sales representatives. But the most common exemptions are for salaried employees who are bona fide executive, administrative, or professional employees.
For an employee to qualify as an exempted executive, administrative or professional employee, the employee must be paid a salary of at least $150 per week. The salary cannot fluctuate based on the quality or quantity of work. Further, a salaried employee must meet certain requirements to be considered a bona fide executive, administrative or professional employee.
First, an exempted executive employee must meet three requirements: 1) her primary duties must be managing the business, or a department of it; 2) she must regularly direct the work of two or more other employees; and 3) she has the authority to hire or fire, or is given a great deal of input into personnel decisions.
Next, an exempted administrative employee must meet the following requirements: 1) his primary duty (at least 80% of his time, or 60% for retail or service industry jobs) is to perform office or nonmanual work directly related to the general business operations; 2) he regularly exercises discretion and independent judgment; 3) he regularly assists the owner or an executive employee, o r performs specialized or technical work requiring specialized training or knowledge, or performs special assignments under only general supervision.
Finally, an exempted professional employee must: 1) have primary duties requiring knowledge gained from specialized studies or work that is original or creative, and 2) regularly exercise discretion and judgment in the performance of such work.
These three categories cover many employees exempted from overtime pay provisions, but there are others. When determining how to compensate your employees, carefully consider the true nature of your employees’ duties before deciding whether to pay them a salary or by the hour. Otherwise, you may face payment of penalties and attorney’s fees for non-payment of overtime wages that can severely damage or even destroy a small business.
| Return to Publication List |
|---|