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Who Is Exempt under the FLSA?

by Gary S. Fealk

Under the Fair Labor Standards Act (FLSA), certain employees may be exempt from overtime pay.

Mastering HR: Overtime

Executive, administrative, and professional employees
An employee whose job duties fall within the executive, administrative, or professional category may be exempt from overtime pay if he is paid on a salary basis. Under the salary test, an employee must be paid a set amount for each pay period, as opposed to being paid only for the number of hours actually worked. The salary must be in excess of $455 per week and paid on a “salary basis” ($23,660 per year). Deductions from the salary are not allowed based on variations in the quality or quantity of work.

The executive exemption generally applies to an employee (1) whose primary duty is management of the enterprise or a recognized department of the enterprise, (2) who customarily and regularly directs the work of two or more employees, and (3) who has the authority to hire and fire employees or makes suggestions about hiring, firing, and other employee status change decisions that are given “particular weight.”

The administrative exemption generally applies to employees whose primary duty (1) consists of office or nonmanual work directly related to management policies or general business operations of the employer or the employer’s customers, and (2) includes the exercise of discretion and independent judgment with respect to matters of significance.

There are two kinds of professional employees who may be exempt from the overtime regulations of the FLSA: (1) learned professionals and (2) creative professionals. Learned professionals’ primary duty is the performance of work requiring advanced knowledge (intellectual in character and requiring exercise of discretion and independent judgment) in a field of science or learning that is customarily acquired by a prolonged course of specialized intellectual instruction (e.g., an engineer). The exemption is generally restricted to professions in which specialized academic training (e.g., a degree) is a standard prerequisite.

Creative professionals’ primary duty requires invention, imagination, originality, or talent in a recognized artistic or creative endeavor (e.g., musicians).

Wage and Hour Compliance Manual

Other common exemptions
Highly compensated employees (earning at least $100,000 annually) are deemed exempt if they customarily and regularly perform one or more of the exempt duties or responsibilities of an executive, administrative, or professional employee.

An outside salesperson’s primary duty is making sales or obtaining orders. He customarily and regularly engages in his duties away from the employer’s place of business. Internet and telephone salespersons do not qualify for this exemption.

The “computer professional” exemption is reserved for employees whose primary duties consist of the application of systems analysis techniques and procedures, the design, development, documentation, analysis, creation, testing, or modification of computer systems or programs, or the design, documentation, testing, creation, or modification of computer programs related to machine operating systems.

In many cases, systems engineers and programmers qualify for this exemption. It is not available to individuals involved in the manufacture or repair of computer hardware, help-desk employees, or employees performing computer-aided design who are not primarily engaged in computer systems analysis and programming or other similarly skilled computer-related occupations. To qualify for the computer professional exemption, an employee must be compensated on either a salary basis at a rate of not less than $455 per week or an hourly basis at a rate of not less than $27.63 per hour.

HR Guide to Employment Law, including overtime

Bottom line
Be careful to correctly categorize employees as exempt or nonexempt and pay overtime (at one and a half times their regular pay rate) to nonexempt employees who work more than 40 hours per week. The burden is on the employer to maintain appropriate records to show that its employees are exempt and that nonexempt employees were properly compensated.

Gary S. Fealk is an attorney and shareholder in Vercruysse Murray & Calzone, P.C., in Detroit. You can reach him at (248) 433-8707.