Exempt employees (FLSA)

Scope

The FLSA covers most U.S. employers.

Regulatory citations

• None

Key definitions

• None

Summary of requirements

The FLSA requires that most employees in the United States be paid at least the federal minimum wage for all hours worked and overtime pay at time and a half the regular rate of pay for all hours worked over 40 hours in a workweek.

To qualify for exemption, employees generally must meet certain tests regarding their job duties, be paid above a certain threshold amount, and be paid on a salary basis. Job titles do not determine exempt status. For an exemption to apply, an employee’s specific job duties and salary must meet all the requirements of the Department of Labor’s (DOL) regulations.

Executive exemption. To qualify for the executive employee exemption, all of the following tests must be met:

• The employee must be compensated on a salary basis (as defined in the regulations) at a rate not less than $684 per week;
• The employee’s primary duty must be managing the enterprise, or managing a customarily recognized department or subdivision of the enterprise;
• The employee must customarily and regularly direct the work of at least two or more other full-time employees or their equivalent; and
• The employee must have the authority to hire or fire other employees, or the employee’s suggestions and recommendations as to the hiring, firing, advancement, promotion, or any other change of status of other employees must be given particular weight.

Administrative exemption. To qualify for the administrative employee exemption, all of the following tests must be met:

• The employee must be compensated on a salary or fee basis (as defined in the regulations) at a rate not less than $684 per week;
• The employee’s primary duty must be 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; and
• The employee’s primary duty includes the exercise of discretion and independent judgment with respect to matters of significance.

Professional exemption. To qualify for the learned professional employee exemption, all of the following tests must be met:

• The employee must be compensated on a salary or fee basis (as defined in the regulations) at a rate not less than $684 per week;
• The employee’s primary duty must be 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;
• The advanced knowledge must be in a field of science or learning; and
• The advanced knowledge must be customarily acquired by a prolonged course of specialized intellectual instruction.

To qualify for the creative professional employee exemption, all of the following tests must be met:

• The employee must be compensated on a salary or fee basis (as defined in the regulations) at a rate not less than $684 per week;
• The employee’s primary duty must be the performance of work requiring invention, imagination, originality or talent in a recognized field of artistic or creative endeavor.

Outside sales exemption. To qualify for the outside sales employee exemption, all of the following tests must be met:

• The employee’s primary duty must be 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; and
• The employee must be customarily and regularly engaged away from the employer’s place or places of business.

Computer employee exemption. To qualify for the computer employee exemption, the following tests must be met:

• The employee must be compensated either on a salary or fee basis (as defined in the regulations) at a rate not less than $684 per week or, if compensated on an hourly basis, at a rate not less than $27.63 an hour;
• The employee must be employed as a computer systems analyst, computer programmer, software engineer or other similarly skilled worker in the computer field performing the duties described below;
• The employee’s primary duty must consist of:
  • The application of systems analysis techniques and procedures, including consulting with users, to determine hardware, software or system functional specifications;
  • 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;
  • The design, documentation, testing, creation or modification of computer programs related to machine operating systems; or
  • A combination of the aforementioned duties, the performance of which requires the same level of skills.

Highly compensated employees. Highly compensated employees performing office or non-manual work and paid total annual compensation of $107,432 or more (which must include at least $684 per week paid on a salary or fee basis) are exempt from the FLSA if they customarily and regularly perform at least one of the duties of an exempt executive, administrative or professional employee identified in the standard tests for exemption.

Typical problems. Some problems and misconceptions which are commonly found in the application of the Section 13(a)(1) exemptions are:

• Employers without a formal sick leave policy are docking salaried, exempt employees for time missed from work because of sickness.
• Employees are not receiving full salary payments each week.
• Employees performing routine production-type duties that seem related to general business operations, but which have no bearing on the setting of management policies.
• Employees who hold degrees performing jobs that are not professional in nature, or for which the degree they hold is not applicable.
• Employers confuse acquired job skills with the exercise of independent judgment and discretion.
• Employees are paid a salary and classified as exempt without regard to duties or percentage of time spent in exempt duties.

Blue-collar workers. The exemptions provided by FLSA Section 13(a)(1) apply only to “white-collar” employees who meet the salary and duties tests outlined in the Part 541 regulations. The exemptions do not apply to manual laborers or other “blue-collar” workers who perform work involving repetitive operations with their hands, physical skill and energy. FLSA-covered, non-management employees in production, maintenance, construction and similar occupations such as carpenters, electricians, mechanics, plumbers, iron workers, craftsmen, operating engineers, longshoremen, construction workers and laborers are entitled to minimum wage and overtime premium pay under the FLSA, and are not exempt under the Part 541 regulations no matter how highly paid they might be.

Police, fire fighters, paramedics, and other first responders. The exemptions also do not apply to police officers, detectives, deputy sheriffs, state troopers, highway patrol officers, investigators, inspectors, correctional officers, parole or probation officers, park rangers, fire fighters, paramedics, emergency medical technicians, ambulance personnel, rescue workers, hazardous materials workers, and similar employees, regardless of rank or pay level, who perform work such as preventing, controlling or extinguishing fires of any type; rescuing fire, crime or accident victims; preventing or detecting crimes; conducting investigations or inspections for violations of law; performing surveillance; pursuing, restraining and apprehending suspects; detaining or supervising suspected and convicted criminals, including those on probation or parole; interviewing witnesses; interrogating and fingerprinting suspects; preparing investigative reports; or other similar work.

Other laws and collective bargaining agreements. The FLSA provides minimum standards that may be exceeded, but cannot be waived or reduced. Employers must comply, for example, with any federal, state, or municipal laws, regulations or ordinances that establish a higher minimum wage or lower maximum workweek than those established under the FLSA. Similarly, employers may, on their own initiative or under a collective bargaining agreement, provide a higher wage, shorter workweek, or higher overtime premium than provided under the FLSA. While collective bargaining agreements cannot waive or reduce FLSA protections, nothing in the FLSA or the Part 541 regulation relieves employers from their contractual obligations under such bargaining agreements.

Drivers. The provisions of Section 7 (overtime) do not apply with respect to any employee to whom the Secretary of Transportation has the power to establish qualifications and maximum hours of service under the provisions of Section 204 of the Motor Carrier Act of 1935.

Section 13(b)(1) of the FLSA provides an exemption from the overtime pay provisions, but not from the minimum wage (Section 6) requirements. This exemption has been interpreted as applying to any driver, driver’s helper, loader, or mechanic employed by a carrier and whose duties affect the safety of motor vehicle operation in the transportation on public highways of passengers or property in interstate or foreign commerce.

Requirements. The Section 13(b)(1) overtime exemption applies to those employees for whom the Department of Transportation claims jurisdiction, and if the employer is:

• A private carrier and hauls property or;
• A common or contract carrier and hauls property or passengers and additionally if;
  • The employee’s duties (consisting wholly or in part) affect the safety of operation of a motor vehicle and;
  • The employee’s travel is in interstate commerce (across State lines) or the employee handles trips which connect with an intrastate terminal (rail, air, water, or land) to continue an interstate journey of goods that have not come to rest at a final destination.

The exemption will apply to those employees called upon in the ordinary course of work to perform, either regularly or from time to time, safety-affecting activities. The employee comes within the exemption in all workweeks when he\she is employed in such work. This general rule assumes that the activities involved in the continuing duties of the job in all workweeks will include activities that affect the safety of operation of motor vehicles. Where this is the case, the exemption will be applicable regardless of the proportion of “safety affecting activities” performed in a particular workweek.

On the other hand, where continuing duties of the employee’s job have no substantial direct effect on such “safety of operation”, or where such safety affecting activities are so trivial, casual, and insignificant as to be de minimis, the exemption will not apply in any workweek so long as there is no change in the duties.

Where safety affecting employees have not made an actual interstate trip, they may still be subject to DOT’s jurisdiction if:

• The employer is shown to have an involvement in interstate commerce and;
• It can be established that the employee could have, in the regular course of employment, been reasonably expected to make an interstate journey or could have worked on the motor vehicle in such a way to be safety affecting.

Satisfactory evidence of the above could take the form of statements from the employees, or documentation from the employer, such as employee agreements. Where such evidence is developed with regard to an employee, the DOT will assert jurisdiction over that employee for a four (4) month period beginning with the date he\she could have been called upon to, or actually did, engage in the carrier’s interstate activities. Thus, such employee(s) would be exempt under Section 13(b)(1) for the same four-month period, notwithstanding references to the contrary in Regulations, 29 CFR 782.2.

The overtime pay exemption does not apply to employees of non-carriers such as commercial garages, firms engaged in the business of maintaining and repairing motor vehicles owned and operated by carriers, or firms engaged in the leasing and renting of motor vehicles to carriers.

Typical problems. A carrier may improperly apply the Section 13(b)(1) overtime exemption to employees of the company who are not engaged in “safety affecting activities,” such as dispatchers, office personnel, those who unload vehicles, or those who load but are not responsible for the proper loading of the vehicle. Only drivers, driver’s helpers, loaders who are responsible for proper loading, and mechanics working directly on motor vehicles that are to be used in transportation of passengers or property in interstate commerce, can be exempt from the overtime provisions of the FLSA under Section 13(b)(1).