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Which Employees Qualify for Exemption from Overtime Pay?

Overtime pay is not for everyone. It’s applicable to employees paid an hourly wage, as well as employees whose fixed salaries fall below the specific salary level set for a given year by the Department of Labor.

The Fair Labor Standards Act (FLSA) requires that at least the federal minimum wage be paid to most employees in the United States for all hours worked and overtime pay at not less than time and one-half the regular rate of pay for all hours worked over the usual cutoff number of 40 hours in a workweek.

But the FLSA provides an exemption from both minimum wage and overtime pay for employees working in the capacity of a bona fide executive, administrative, professional and outside sales employees, as well as certain computer employees.

Qualifying for the exemption

To qualify for exemption, employees generally must (1) meet certain tests regarding their job duties and (2) be paid on a salary basis at not less than the current amount of $684 per week.

Employers may use nondiscretionary bonuses and incentive payments (including commissions) paid on an annual or more frequent basis, to satisfy up to 10 percent of the standard salary level.

Job titles do not give employees an exempt status.

An exemption applies only if an employee’s specific job duties and salary meet all the requirements of the Department of Labor’s regulations.

Qualifications for exemptions

Exemptions for executive employees

  • Salary-based compensation (as defined in the regulations) at a rate not less than $684 per week
  • Primary duty consisting of managing an enterprise or managing a customarily recognized department or subdivision of the enterprise
  • Customary and regular direction of the work of at least two or more other full-time employees or their equivalent
  • Authority to hire or fire other employees, or influence, through suggestions and recommendations, on the hiring, firing, advancement, promotion, or any other change of status of other employees

Exemptions for administrative employees

  • Salary-based compensation (as defined in the regulations) at a rate not less than $684 per week
  • Primary duty that consists of the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers
  • Primary duty that includes the exercise of discretion and independent judgment with respect to matters of significance

Exemption for professionals

  • Salary- or fee-based compensation (as defined in the regulations) at a rate not less than $684 per week
  • Primary duty must that consists of the performance of work requiring advanced knowledge, defined as work which is predominantly intellectual in character and which includes work requiring the consistent exercise of discretion and judgment
  • Advanced knowledge that applies in a field of science or learning
  • Advanced knowledge that is customarily acquired by a prolonged course of specialized intellectual instruction

Exemption for creative professionals

  • Salary- or fee-based compensation (as defined in the regulations) at a rate not less than $684 per week
  • Primary duty that consists of the performance of work requiring invention, imagination, originality or talent in a recognized field of artistic or creative endeavor

Exemption for computer employees

  • Salary- or fee-based compensation (as defined in the regulations) at a rate not less than $684 per week, or not less than a rate of $27.63 an hour in an hourly-based compensation
  • Employment as a computer systems analyst, computer programmer, software engineer or other similarly skilled worker in the computer field performing the duties described below
  • Primary duty that consists of the following:
    1. the application of systems analysis techniques and procedures, including consulting with users, to determine hardware, software or system functional specifications
    2. the design, development, documentation, analysis, creation, testing or modification of computer systems or programs, including prototypes, based on and related to user or system design specifications
    3. the design, documentation, testing, creation or modification of computer programs related to machine operating systems
    4. a combination of the above duties, the performance of which requires the same level of skills

Exemption for outside sales employees

  • Primary duty that consists of making sales (as defined in the FLSA), or obtaining orders or contracts for services or for the use of facilities for which a consideration will be paid by the client or customer
  • Customary and regular engagement away from the employer’s place or places of business

Exemption for highly compensated employees (HCEs)

  • Salary- or fee-based compensation (as defined in the regulations) at an annual total of $107,432 or more (which must include at least $684 per week)
  • Performance of office or non-manual work
    Customary or regular performance of at least one of the duties of an exempt executive, administrative or professional employee identified in the standard tests for exemption

The exemptions provided by FLSA do not apply to manual laborers or other blue-collar workers, as well as the police, firefighters, paramedics, and other first responders.

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This article provides general information and shouldn’t be construed as legal or HR advice. Since employment laws may change over time and can vary by location and industry, please consult a lawyer or HR expert for advice specific to your business. You can also contact Payroll Systems to inquire about our HR support services.