Employee Overtime: Who is Exempt?
On August 23, 2004, changes were implemented to the Fair Labor Standards Act (“FLSA”). The FLSA requires that employers pay minimum wage and overtime for all hours worked over 40 hours per week to all employees who are not otherwise exempt. The changes that were implemented address the determination of which employees are exempt from the requirement of minimum wage and overtime pay. The changes to the FLSA require that any employees who are paid less than $23,660 per year be paid overtime for all hours worked over 40 per week and any employees who are paid more than $100,000 per year are exempt from overtime requirements. The determination of whether an employee who makes between $23,660 and $100,000 per year is exempt from overtime is based upon a set of criteria outlined in the FLSA.
An exemption from the minimum wage and overtime requirements exists for those employees who are employed in an executive, administrative, professional, certain computer professions, creative professions and outside salesperson capacity. In order to be exempt from overtime and minimum wage an employee must meet the specified criteria listed below and be paid a salary of not less than $455 per week, or $23,660 per year. If an employee is not paid at least $455 per week, the employee is never exempt from the requirements of minimum wage and overtime pay. If an employee is paid over $100,000 per year the employee is exempt from the overtime and minimum wage requirements. Below are the lists of categories that are exempt and the criteria the employee must meet in order to qualify.
In order for an employee to qualify for the executive employee exemption the following criteria must be met: (1) the employee’s primary duty must be to manage the entity or manage a customarily recognized department or subdivision of the entity; (2) the employee must regularly direct the work of at least two full-time employees; and (3) the employee must have the authority to hire or fire other employees; or the employee’s suggestions as to hiring, promoting and firing must be given weight.
To qualify for the administrative employee exemption, the following criteria must be met: (1) the employee’s primary duties must be office-related or a non-manual task directly related to the management or operations of the employer or the employer’s customer; and (2) the employee’s primary duties include the right to exercise discretion and independent judgment with regard to significant matters.
In order for an employee to qualify for the professional exemption, the following criteria must be met: (1) the employee’s primary duties must require advanced knowledge; (2) the advanced knowledge must be in a field of science or learning; and (3) the knowledge must be customarily gained through extensive study. Advanced knowledge is defined as work which is predominantly intellectual in character and which includes work requiring the consistent exercise of discretion and judgment.
CREATIVE PROFESSIONAL EXEMPTION
To qualify under the creative professional exemption the employee’s primary duties must be work requiring invention, imagination, originality or talent in a recognized field of artistic or creative endeavor.
In order for an employee to qualify under the computer employee exemption the following criteria must be met: (1) the employee must be compensated by either a salary of $455 per week or if compensated hourly, at an hourly rate of $27.63 per hour; (2) 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 following duties: (a) the application of systems analysis techniques and procedures, including consulting with users, to determine hardware, software or system functional specifications; (b) 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; (c) the design, documentation, testing, creation or modification of computer programs related to machine operating systems; or (d) a combination of the aforementioned duties.
OUTSIDE SALES EXEMPTION
To qualify under the outside sales exemption, the following criteria must be met: (1) the employee’s primary duty must be making sales, 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 (2) the employee must be customarily and regularly engaged away from the employer’s place or places of business.
HIGHLY COMPENSATED EMPLOYEE EXEMPTION (over $100,000)
There is also an exemption in the FLSA for highly compensated employees. If an employee who is performing office work or non-manual work is paid an annual salary of $100,000 or more (with at least $455 paid per week) and the employee regularly performs at least one of the duties of an exempt executive, administrative or professional employee, then the highly compensated employee is exempt from minimum wage and overtime pay.
The exemptions of Section 13(a)(1) apply only to “white collar” workers and do not apply to manual laborers. Non-management employees in production, maintenance, construction and similar occupations, such as carpenters, electricians, mechanics, plumbers, iron workers, craftsmen, operating engineers, longshoremen, 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.
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, firefighters, 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.