North Dakota Wage and Hour laws can be confusing. Many small business owners think that if they simply pay their employees a “SALARY” that they don’t have to pay them overtime. That’s not how it works, at least not in North Dakota. Simply being paid on a salary basis is not enough to make an employee exempt from overtime pay. Many employers will make the decision based on the fact that they simply want to avoid the overtime expense. When in fact, you should be making the decision based on the duties they perform, how you plan to pay them, and how much you plan to pay them. Federal and state law says that you must pay your employees a minimum established wage plus applicable overtime. However, there are certain exemptions available under North Dakota Law that “exempt” certain workers from overtime. Most commonly, when thinking of exemptions, people assume the duties test, is all they need to know about. The duties test lists the duties required for exemptions for Executive, Administrative, and Professional classifications of employees (and a few others). What they fail to remember is that there are actually THREE exemption tests an individual must pass in order to be exempt from overtime pay.
” There are actually THREE exemption tests an individual must pass in North Dakota order to be exempt from overtime pay. “
1.The Duties Test. These duties exemptions are listed on the reverse of the ND Wage and Hour ‘ND MINIMUM WAGE & WORK CONDITIONS SUMMARY’ poster that you should have hanging in your business (where your employees can see it). If you don’t have that poster, here is a link to the PDF, which lists all applicable exemptions on page 2. Side note – the Government is a little behind and this poster hasn’t been updated since 2015. So, it doesn’t reflect the changes made to the Department of Labor’s Overtime Rule which went into effect January 2020. We’ll review the important changes to note under the Salary Level Test section below. Many of these duties exemptions are industry specific: Agriculture, domestic services, computer professionals, mechanics, artists, teachers, sales employees, announcers, commercial truck drivers, and a few others. Generally speaking, an employee employed in a bona fide executive, administrative, or professional capacity meets the following requirements:
Executive – an employee whose primary duties consists of: a. The management of the enterprise or recognized department or subdivision thereof; b. Directing the work of two or more other employees therein; and c. The authority to hire or fire other employees or whose suggestions will be given particular weight.
Administrative – an employee whose primary duties consists of: a. Office or non-manual work directly related to management policies or general business operations; and b. Who customarily and regularly exercises discretion and independent judgment.
Professional – an employee whose primary duties consists of: a. Work requiring knowledge of an advanced type in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction and study as distinguished from a general academic education and from an apprenticeship, and from training in the performance of routine mental, manual, or physical processes; b. Work requiring the consistent exercise of discretion and judgment in its performance; and c. Work that is predominately intellectual and varied in character as opposed to routine mental, manual, mechanical, or physical work.
2. The Salary Level Test. We’ve established the duties required to be exempt from overtime, now we need to ensure the level of the amount of salary we’re paying passes test #2. The salary level test mandates employees be paid at LEAST $35,568 per year for a full-year worker or $684 per week. (If they make less than that, sorry, they must be paid hourly, and must be paid overtime unless you are willing to make up the difference with regular, quarterly, or annual commission, bonus or catch-up payments.) This salary level was recently updated by the Department of Labor and the new amount hasn’t been updated on the ND Wage and Hour Division employment poster. That poster still states the old law’s salary level of $455 per week or $23,660 per year amounts. It also references the old amounts for highly compensated employees. You can read more here.
3. The Salary Basis Test. This test simply means that the individual in question must be paid on a salary basis. That means the individual is paid a predetermined amount each pay period. The amount cannot be reduced because of variation in quality or quantity of the individual’s work. The individual must receive the full salary any week that he/she performs any work, regardless of days worked. Generally, the salary should be paid as a lump sum amount. Although there are certain total exemptions for particular categories of employees such as lawyers and medical professionals as well as hourly payment allowances for computer professionals. lt up over the years costs around $150/hr, which is probably on the low end. Not to mention the time you need to take away from work and the kids to make it happen. Add in babysitters and PTO to that and financially, it’s a burden. So – to answer the question in the title:
Sort of. If you want to pay your employees hourly and then not allow them to work over 40 hours in one week. You can make that call. You are the employer. This way – you don’t have to pay overtime. If you want an employee to work as a long as it takes to get the work done and they happen to work more than 40 hours in one week the only way you would get out of paying overtime was if they: 1) Passed the duties test – and fit the qualifications of one of the duties exemptions; AND 2) They passed the levels test – and they are paid at least $684 per week. AND 3) They passed the basis test – meaning they are paid the same amount each week regardless of hours worked, not worked, or quality/quantity of work. If you’re a small business owner, make sure that you review the salary levels and ensure that you’re paying your employees accordingly. If you had an employee who passed the salary levels test at $23,660 you may no longer be interested in keeping them salaried based on the 2020 changes. In fact, you would need to give them a wage increase of $11,908 to get them to the new required salary level if you chose to keep their status the same. If you have questions regarding any of the content covered in this article, our business lawyers at Nilson Brand Law are always willing to take your consultation. Everyone’s issue is important. Contact us today if you have questions.