Lee R. Schroeder | The Lima News
Some people are paid by the hour, day or week. Other people are paid by the “job”.
Most workers paid for the time that the worker is actually working or “on call” to work are called “hourly” employees, even if the pay is precise enough to be “by the minute”.
There are also workers who are paid a set pay for each week, month or year, even if that worker works more or fewer than 40 hours each week during that week, month or year. This payment type is called a “salary”.
People who are paid by the job or project are typically referred to as being “independent contractors”.
A benefit to employers for employees being paid as independent contractors is that the employer can save some employment tax obligations.
A benefit to employers for employees being paid salaries is that the employer can sometimes get 50, 60 or 70 hours of work from the employee each week while only paying for 40 hours. Usually, though, both employers and employees agree to a salary that considers and integrates that possibility.
Nevertheless, independent contractors and salaried employees are not entitled to overtime, but hourly employees are always entitled to overtime.
Because of the potential for abuse of salaried employees and independent contractors, federal law (although it ebbs and flows based upon the Presidential administrations and Congressional makeup) generally defaults to the definition and requirement that employers pay employees hourly with overtime being earned for any time worked over 40 hours in any certain week.
Thus, people who work for others are only considered independent contractors if the payer has no ability to tell the worker the precise aspects and steps of how to do the work. Payers of independent contractors can only define the end result of the work that the independent contractor does.
For example, independent contractors tend to be hired for tasks where the end result is all that matters, like construction or freelance work.
When the worker is not an independent contractor, the worker is either an hourly or salaried employee. Salaried employees must generally either (a) conduct some sort of management work or (b) have some oversight over other people.
However, the U.S. Supreme Court recently clarified an additional requirement for employees to be salaried employees. In that recent Supreme Court case, a manager of at least 12 people who was paid for every day that the manager worked was not eligible to be a salaried employee. Importantly, that manager was paid over $200,000 per year and often worked many more than eight hours a day.
Thus, in addition to having management or supervisory responsibilities, salaried employees must “be paid by the week (or longer).” An employee who is paid by the day, regardless of how many hours the employee works that day cannot be a salary employee, despite having clear management or supervisory responsibilities.
Usually, employees can be paid for productivity (items produced) as long as the pay always satisfies the hourly pay requirements of minimum wage and overtime.
Lee R. Schroeder is an Ohio licensed attorney at Schroeder Law LLC in Putnam County. He limits his practice to business, real estate, estate planning and agriculture issues in northwest Ohio. He can be reached at [email protected] or at 419-659-2058. This article is not intended to serve as legal advice, and specific advice should be sought from the licensed attorney of your choice based upon the specific facts and circumstances that you face.
