Exemptions from Overtime/Minimum Wage

Federal law (the Fair Labor Standards Act or FLSA) generally requires that employees earn at least minimum wage and receive overtime pay for hours worked over 40 unless they fall within one of the exemptions from those requirements. Simply agreeing to be paid a salary does not mean that you are not entitled to overtime pay. Our team of employment attorneys can help determine if you were paid correctly and whether you are entitled to additional pay under the law.

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Executive Exemption

To be subject to the FLSA’s executive exemption, you must meet all four parts of the following test:

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

Example of a potential executive exemption violation: If you do not supervise at least 80 labor hours worked by employees each week, you may be misclassified. This situation may arise, for instance, in small retail stores where a manager supervises only one employee or two part-time employees.

Administrative Exemption

To be subject to the FLSA’s administrative exemption, you must meet all three parts of the following test:

• You must be compensated on a salary basis at a rate not less than $684 per week.
• Your primary duty must be the performance of office or non-manual work directly related to the management or general business operations of your employer or your employer’s customers.
• Your primary duty must include the exercise of discretion and independent judgment with respect to matters of significance.

Example of a potential administrative exemption violation: If you perform office-type work, but your responsibilities are not necessarily related to running the business operations, or your work and decisions are closely supervised, you may be misclassified. Also, if your primary duty is inside sales, you typically will not meet the requirements of the administrative exemption.

Professional Exemption

There are two types of professional exemptions under the FLSA: (1) the learned professional exemption; and (2) the creative professional exemption.

To be subject to the FLSA’s learned professional exemption, you must meet all four parts of the following test:

• You must be compensated on a salary basis at a rate not less than $684 per week.
• Your 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.
• The advanced knowledge must be customarily acquired by a prolonged course of specialized intellectual instruction.

To be subject to the FLSA’s creative professional exemption, you must meet both parts of the following test:

• You must be compensated on a salary basis at a rate not less than $684 per week.
• Your primary duty must be the performance of work requiring invention, imagination, originality, or talent in a recognized field of artistic or creative endeavor.

Example of a potential learned professional exemption violation: A Registered Nurse, paid a salary, whose job does not require them to use their advanced clinical knowledge, may be misclassified as exempt from overtime pay under the professional exemption.

Highly Compensated Employee Exemption

If you perform office or non-manual work and you are paid a total annual compensation of $107,432 or more, which must include at least $684 per week, you may be exempt from the FLSA’s overtime requirements if you customarily and regularly perform at least one of the duties of an exempt executive, administrative, or professional employee, discussed above.

Computer-Related Exemption

To be subject to the FLSA’s computer-related exemption, you must meet all three parts of the following test:

• You must be compensated on a salary basis at a rate not less than $684 per week or be compensated on an hourly basis at a rate not less than $27.63 an hour.
• You must be employed as a computer systems analyst, computer programmer, software engineer, or other similarly skilled worker in the computer field.
• Your primary duty must consist of at least one 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; or (4) a combination of the aforementioned duties.

Example of a potential computer-related exemption violation: If your job duties consist of the manufacture or repair of computer equipment, or you work in a help desk position, you may be misclassified as exempt.

Outside Sales Exemption

To be subject to the FLSA’s outside sales exemption, you must meet both parts of the following test:

• Your primary duty must be making sales or obtaining orders or contracts for services.
• You must be customarily and regularly engaged in work away from your employer’s place of business.
• Unlike many other FLSA exemptions, you need not be paid a certain amount per week to be subject to the outside sales exemption.

Example of a potential outside sales exemption violation: If your job is making sales primarily from inside the office or at home it is unlikely you are subject to the outside sales exemption to the overtime laws.

Retail or Service Establishment Exception

To be subject to the FLSA’s retail or service establishment exception, you must meet all three parts of the following test:

• You must be employed by a retail or service establishment. Retail and service establishments are defined as establishments 75% of whose annual dollar volume of sales of goods and/or services is not for resale and is recognized as retail sales or services in a particular industry.
• More than half of your total earnings must represent commissions.
• Your total compensation divided by the number of hours you work or your regular hourly rate must be greater than one and one-half times the federal minimum wage.

Example of a potential retail or service establishment exception violation: If you work for a retail establishment, but do not make more than 50% of your earnings in commissions and/or your earnings within a representative period (typically a week) do not equal one and one-half times the federal minimum wage, you may be misclassified. For example, a mobile device salesperson in a retail store who does not earn at least half of her earnings in commissions may be misclassified as exempt.