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What Are the FLSA White Collar Exemptions?

With all the talk about the new white collar overtime exemptions, you may be wondering what these exemptions are and whether they apply to your organization. In a nutshell, they pertain to whether certain employees must be paid overtime rates for hours worked over 40 in a week. While most employees must be paid at least minimum wage and time-and-a-half for overtime, some employees can be classified as exempt from these requirements. The most common way to classify employees as exempt is with one of the “white collar exemptions.”

Among these, the most commonly used white collar exemptions are the executive, administrative, and professional exemptions. These may be applied when the position/employee passes three tests (keep in mind states may have different requirements):

  1. They perform non-manual work and their primary duties are executive, administrative, or professional.
  2. They make a minimum salary of $455 per week, which equals $23,660 per year ($913 per week and $47,476 per year beginning December 1).
  3. They are paid on a salary basis, meaning they receive the same pay each week regardless of number of hours worked, or the quantity or quality of their work.

Some employees whose duties qualify them for the professional exemption – bona fide teachers and practicing doctor and lawyers – do not have to be paid a minimum salary, or on a salary basis; they only have to pass the duties test. However, some states don’t allow this exception to the salary rules (e.g. California), so employers should double check state law before taking any liberties with these types of employees.

Another way employees can be exempt is if they qualify as a highly compensated employee (HCE). This exemption may be applied if the employee passes three different tests:

  1. They perform non-manual work, and customarily and regularly perform at least one or more executive, administrative, or professional duties.
  2. They receive total compensation of at least $100,000 per year ($134,004 beginning December 1).
  3. They make at least $455 per week, every week, on salary basis ($913 beginning December 1).

When would you want to use the HCE exemption? Consider a CEO’s executive assistant making $125,000 per year. His/her primary duties include typing dictated letters, making travel arrangements, placing phone calls, and party planning—none of which are exempt duties. But he also manages two full-time administrative assistants; this responsibility doesn’t take up much of his time, but it is something that he does regularly. Based on his job duties as a whole, he doesn’t pass the test to be properly classified as an executive, but since he makes over $100,000 per year and performs at least one executive duty on a regular basis, he can be properly classified as exempt as an HCE.

Keep in mind that classifying an employee as exempt is a benefit to the employer. You are never required to classify an employee as exempt, and you may always pay them on an hourly basis, regardless of duties or pay. You’ll just have to pay an overtime premium for hours worked over 40 in a week.

Content provided by TPC HR Support Center.