Exemptions: Overtime and minimum wage

Overtime wage exemptions

Section 13 of the federal Fair Labor Standard’s Act (FLSA) provides an exemption from both minimum wage and overtime pay for employees employed as bona fide executive, administrative, professional, outside sales, and certain computer employees. To qualify for exemption, employees generally must meet specific criteria regarding their job duties and be paid on a salary basis at not less than $455 per week.

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 regulations.

In recent years, there has been a tremendous increase in litigation involving wage and hour claims. Employers must be extremely careful when classifying employees, and should ensure that exempt employees meet any applicable requirements of state law as well as the federal requirements that are summarized below.

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 at a rate not less than $684 per week;
• Have the primary duty of managing the enterprise, or managing a customarily recognized department or subdivision of the enterprise;
• Customarily and regularly direct the work of at least two or more other full-time employees or their equivalent; and
• 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;
• Have the primary duty of performing office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers; and
• Have primary duties that include using 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.

• 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; and
• 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.

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;
• 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:
  
  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; or
  4. A combination of the aforementioned duties, the performance of which requires the same level of skills.

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.

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.

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 set forth 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. This group performs 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.

Minimum wage exemptions

Various minimum wage exemptions apply under specific circumstances to tipped workers, workers with disabilities, full-time students, youth under age 20 in their first 90 consecutive calendar days of employment, and student-learners.

Some states have minimum wage laws specific to tipped employees. When an employee is subject to both the federal and state wage laws, the employee is entitled to the provisions of each law that provide the greater benefits.

Minimum wage for workers with disabilities

Any individual whose earning or productive capacity is impaired by a physical or mental disability, including those related to age or injury, may be paid sub-minimum wages when the impairment is certified by the U.S. Department of Labor (DOL). The sub-minimum wages must be comparable to wages paid to non-disabled workers. The DOL authorizes employment at less than the minimum wage to increase opportunities for disabled workers to be employed.

Employers interested in applying for a sub-minimum wage certificate for disabled workers should contact the Department of Labor's Wage and Hour Division in their region.

Minimum wage for young workers

A minimum wage of $4.25 per hour applies to young workers under the age of 20 during their first 90 consecutive calendar days of employment with an employer, as long as their work does not displace other workers. After 90 consecutive days of employment or the employee reaches 20 years of age, whichever comes first, the employee must receive the statutory minimum wage.

Minimum wage for full-time students

The Full-time Student Program is for full-time students employed in retail or service stores, agriculture, or colleges and universities. The employer that hires students can obtain a certificate from the Department of Labor which allows the student to be paid not less than 85 percent of the minimum wage.

The certificate also limits the hours that the student may work to eight hours a day and no more than 20 hours a week when school is in session and 40 hours when school is out. It also requires the employer to follow all child labor laws. Once students graduate or leave school for good, they must be paid the statutory minimum wage.

There are some limitations on the use of the full-time student program. For information on the limitations or to obtain a certificate, contact the Department of Labor’s Wage and Hour regional office.

Minimum wage exceptions for student learners

This program is for high school students at least 16 years old who are enrolled in vocational education (shop courses). The employer that hires the student can obtain a certificate from the Department of Labor which allows the student to be paid not less than 75 percent of the minimum wage, for as long as the student is enrolled in the vocational education program.

Employers interested in applying for a student learner certificate should contact the Department of Labor Wage and Hour Regional Office with jurisdiction over their state.