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 one-half the regular rate of pay for all hours worked over 40 hours in a workweek. Employees who are eligible for overtime pay under the FLSA are referred to as “non-exempt.”
The FLSA, however, carves out exemptions for both minimum wage and overtime pay for certain “white collar” employees. Employees who fall under these exemptions are referred to as “exempt” employees (i.e., they are exempt from the overtime requirements of the FLSA). On August 23, 2004, the revised U.S. DOL regulations went into effect with the intent of simplifying the determination of who is exempt from overtime pay under the FLSA.
Basic Criteria Of Exempt Status
There are three basic criteria of being exempt from overtime pay under the FLSA:
Specific Exemptions: Job Duties
As discussed in the previous section, in order for an employee to be considered exempt (i.e. ineligible for overtime pay) under the FLSA, the employee must satisfy the duties test of a specific exemption as defined by the revised 2004 U.S. DOL regulations. A summary of those exemptions is as follows:
Computer Employee Exemption: The 2004 revised exemptions included this new definition which applies to employees whose primary duty lies in system design and analysis rather than maintenance.
Executive Exemption: Under The Executive Exemption:
Administrative Exemption: Under the administrative exemption, 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 must include the exercise of discretion and independent judgment with respect to matters of significance. This exemption typically covers employees who are engaged in human resources, quality control, claims adjusting, financial services, auditing, tax, etc.
Professional Exemption: The professional exemption is divided into two parts:
In addition to the exemptions above, “highly compensated employees” who perform office or non-manual work and are paid a total compensation of $100,000 per year or more (which includes at least $455 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.
The determination of whether an employee is exempt from overtime pay under the FLSA is a complex, yet necessary analysis. Employers often mistakenly believe that job titles determine exempt status.
To the contrary, in order for an exemption to apply, an employee’s specific job duties and salary must meet all the requirements of the U.S. DOL’s regulations. Please note, however, that that information provided above is merely a summary, and not a substitute for an experienced attorney’s interpretation of the full regulations.
Be on the lookout for Part II of our two-part series dedicated to examining overtime compliance, which will review the benefits and components of a FLSA “compliance review,” as well as the penalties/sanctions for noncompliance.
We welcome your comments and suggestions on our newsletter. Feel free to contact us at the e-mail address provided below.