What is EAP and How Does It Affect Small Businesses

Exempt employees under the Executive, Administrative, and Professional (EAP) exemptions are covered by provisions of the Fair Labor Standards Act (FLSA) In the U.S. These employees are not entitled to overtime pay under FLSA rules because they meet specific criteria related to job duties and salary.

EAP exemption laws under FLSA are indeed in a constant state of evolution. Federal and state authorities frequently update EAP regulations to address economic trends and workforce needs.

For example, in April of 2024 the U.S. Department of Labor (DOL) issued a new rule significantly increasing the minimum salary thresholds for these EAP exemption employees. It went into effect in July 2024 and was slated to increase in January 2025. The DOL also added automatic updates that were going to start in 2027. However, all these measures were just knocked down by the Fifth District Court of Texas on November 15^th, 2024.  Effectively making the change to EAP Employees null and void.  We just wrote a blog on this topic that you can read HERE.

This reflects the ongoing debate over salary levels and duties tests for EAP exemptions, and legal challenges often follow such updates. Employers must continuously monitor these changes to ensure compliance

Here Are the Standard Rules for EAP Employees:

How do you know if you should classify an employee as a EAP?  Here are the federal standards that businesses should know when trying to determine how to classify an employee.

The EAP Salary Basis Test

• Guaranteed Salary: Exempt employees must be paid on a salary basis, meaning they receive a fixed amount of compensation regularly (weekly, bi-weekly, monthly) that does not vary based on hours worked or performance.
• Minimum Salary: The minimum salary threshold that is subject to change based on DOL and FSLA rulings.

The EAP Duties Test

Exempt employees must perform specific types of duties to qualify for the exemption.  Here are the basics for establishing if the employee should be classified as and EAP due to their job responsibilities.

• Executive Exemption:
  • Primary duty is managing the enterprise or a department.
  • Directs the work of at least two full-time employees.
  • Has hiring/firing authority or significant input into such decisions.
• Administrative Exemption:
  • Primary duty involves non-manual work related to business operations or management.
  • Exercises discretion and independent judgment on significant matters.
• Professional Exemption:
  • Primary duty involves work requiring advanced knowledge in a field of science or learning, typically acquired through higher education.
  • Includes creative professionals engaged in artistic or intellectual work.

EAP Employees Do Not Receive Overtime

Exempt employees are not eligible for overtime pay regardless of hours worked beyond 40 in a workweek. Employees classified as exempt under the Fair Labor Standards Act (FLSA), often referred to as “EAP employees” (Executive, Administrative, and Professional), typically do not receive overtime pay because of the nature of their job duties and compensation structure.

Can Employers Deduct Pay from EAP Employees?

Employers generally cannot deduct pay from exempt employees for partial-day absences. If you were to do that as a small business owner, you may jeopardize their exempt status. However, deductions may be allowed in these circumstances.

• Full-day absences for personal reasons or sickness (if paid leave is not available).
• Disciplinary suspensions for workplace violations.
• Weeks in which no work is performed.

What Are the State Laws for EAP Employees?

Some states, such as California or New York, impose additional requirements for exempt employees, such as higher salary thresholds or more stringent duties tests. Employers must comply with the law most favorable to the employee.

Ohio follows the federal Fair Labor Standards Act (FLSA) guidelines for EAP exemptions, with no specific state-level rules that differ significantly from federal standards.

Penalties for Misclassification of EAP Employees:

Yes, there are significant penalties for misclassifying EAP employees as exempt when they do not meet the legal criteria under the Fair Labor Standards Act (FLSA) or applicable state laws. These penalties can have financial, legal, and reputational consequences for employers.

Here’s what you need to know:

1. Back Wages
   • Employers may be required to pay all unpaid overtime wages for the misclassified employee, going back up to:
     • 2 years under the FLSA.
     • 3 years if the violation is found to be willful (employer knew or recklessly disregarded the misclassification).
2. Liquidated Damages
   • Employers may owe an amount equal to the unpaid wages as liquidated damages, effectively doubling the liability.
3. Civil Penalties
   • The Department of Labor (DOL) may impose additional civil penalties, especially if misclassification is widespread or willful.
     • For repeated or willful violations, penalties can be up to $2,074 per violation (subject to periodic increases).
4. Legal Fees
   • Employers may be required to pay the employee’s attorney fees and court costs if the employee prevails in a lawsuit.
5. State Penalties
   • Some states impose additional penalties for wages and hour violations. While Ohio does not have unique penalties for EAP misclassification, the employer may face action under general wage theft or fraud statutes.
6. Tax and Benefits Liabilities
   • Misclassification may also trigger tax penalties if unpaid Social Security, Medicare, unemployment insurance, or workers’ compensation contributions are discovered during audits.

Need More Help Determining if Your Employees Are EAP Exempt?

ClarityHR is here to help small business owners with DOL and FLSA standards regarding EAP employees.  The rules and regulations are always subject to change.  As a small business owner, it is important to have an advocate like ClarityHR in your corner to make sure you are always compliant with state and federal labor laws.  Contact Us today with any questions you have.  Whatever you do DO NOT GOOGLE IT.