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EXERCISE 1
DETERMINING EXEMPTION STATUS AND PAY
Exercise 1 gives students the opportunity to determine the exemption status of several jobs under
the provisions of the Fair Labor Standards Act. Further, they have the opportunity to calculate wages
under the terms of the Act.
Answers to the Assignment:
Mabel Jones
Mabel Jones has been of considerable interest to instructors using the last few editions of this
Exercise Book. She continues to be a non-exempt employee, even under the revised definitions.
Since Mabel is not exempt from the provisions of the FLSA, her earnings and overtime should be
calculated as follows (this presumes that her pay of $795 per week is intended to compensate her for 50
hours):
Working 5 days a week, 7:30 a.m. to 5:30 p.m. (10 hours per day) or 50 hours per week
$795 per week/50 = $15.90 per hour
Overtime = $15.90 x 10 x 1/2 = $79.50 a week
Owed $795 + $79.50 = $874.50
Since Mabel is nonexempt, overtime calculations must recognize the commissions Mabel earns.
The commissions must be incorporated into Mabel’s regular earnings to determine her base pay for
overtime purposes. Assume Mabel earns $1,250 in commission during a quarter (3 months) and is paid
that amount at the end of the quarter. Her base earnings for the last 13 weeks would be added to the
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Note: The reason for the 1/2 time pay for the 10 hours of work in calculating the
overtime is that Mabel has already been paid for one time for the overtime hours. Now Olympia must pay
the 1/2 time for the extra 10 hours.
A major issue with commissions is the time when the payment is made. The rule to observe
when calculating base pay is:
1. If weekly, simply add commission to weekly earnings.
2. If every two weeks, add commission to two weeks’ earnings and calculate base hourly
rate.
Since Olympia pays Mabel a salary of $795 per week, which exceeds the $455 per week
minimum salary for an executive, Mabel could almost be assured of meeting the Executive exemption if
Harry Norman and Rosie Hibbs
Harry is truly a programmer while Rosie is a systems analyst. Both, however, pass the computer
employee test for exemption. Consequently, neither must be paid overtime according to FLSA provisions.
David Marks
David’s job as a PC Support Specialist does not normally meet the criteria of a computer
employee for FLSA purposes. This is one of those jobs that compensation professionals frequently find
themselves fighting line management over. The argument that “it’s an exempt job in my company” does
not necessarily make it exempt. Thus, it could spark considerable discussion among students.