Both the US Department of Labor and the Montana Department of Labor have recently made changes to the salary threshold for certain exempt employees, causing some confusion. As of January 1st, 2020, the new salary threshold set by the US Department of Labor is $684 per week.
Executive Exemption
The executive exemption applies to managers and supervisors who meet the salary requirement and oversee two or more full-time employees or equivalent part-time employees. Their primary duty should be directing the enterprise or a section of it, and they should have the authority to make important decisions regarding hiring, firing, promotions, and other similar changes.
Administrative Exemption
The administrative exemption applies to individuals such as Human Resources Directors who meet the salary threshold and perform non-manual work related to the business operations of the enterprise. Their primary duties should address matters of significance, and they should exercise judgment and discretion in these matters, not just implementing changes but also creating and implementing them.
Professional Exemption
The professional exemption applies to artists, architects, and other professionals who meet the salary requirement and have advanced knowledge or talent in a specific area. This advanced knowledge is often accompanied by a degree or recognized field of artistic endeavor. These professionals may also work in areas requiring invention, imagination, and originality.
It is important to note that these are just some common examples, and there may be other professions covered under these exemptions.
Prior to January 1st, 2020, both the US Department of Labor and Montana had a salary threshold of $455 per week. However, the US Department of Labor raised their threshold to $684 per week. Currently, Montana’s administrative rules still reflect the prior salary threshold, causing some confusion among employers, employees, and human resource professionals.
Fair Labor Standards Act (FLSA) Coverage
For our purposes, it is essential to understand who is covered under the Fair Labor Standards Act (FLSA). Under the FLSA, there are two areas of coverage: Enterprise and Individual.
Enterprise Coverage
Enterprise coverage applies to businesses with at least two employees and annual sales of $500,000 or more. It also applies to hospitals, businesses providing medical or nursing care, schools, preschools, and government agencies.
Individual Coverage
Individual coverage applies to enterprises engaging in interstate commerce, which includes various forms such as accepting credit cards, communicating with individuals outside the state for business purposes, handling interstate commerce transactions, and shipping or receiving items across state lines. Domestic service workers are generally covered under the FLSA as well.
Based on the wide coverage of the FLSA, the higher standard should be applied in situations where conflicting standards exist. Montana’s administrative rules referencing the previous salary threshold are overridden by the higher standard set by the US Department of Labor.
It is important to understand that the majority of employees in Montana are covered by the FLSA, and the higher standard principle applies to nearly all employees. If you have any questions or need further clarification, please don’t hesitate to contact our office.