Q. What types of employees are entitled to overtime pay – which are not?
A. There are two types or categories of employees, exempt and non-exempt. Exempt employees are those who, due to their job duties and compensation, are not legally entitled to overtime and are, therefore, “exempt” from the laws regarding overtime pay. Non-exempt employees are those whose job duties do not fit within any of the exemptions provided for under the FLSA and are, therefore, entitled to overtime pay.
The exemptions provided for under the FLSA are very limited and narrow, and the burden is placed on the employer to prove that any given employee or class of employees is not exempt.
Note that the minimum salary required for the Executive, Administrative, and Professional overtime exemptions changes as of January 1, 2020. The new overtime rule sets the minimum yearly salary for exempt employees at $35,568 or $684 per week, versus the prior salary requirement of $23,600/year or $455 per week.
While the issue of exemptions can be complicated, the following is a general overview of the primary tests devised by the Department of Labor:
Executive Exemption
To qualify for the executive employee exemption, all of the following tests must be met:
- The employee must be compensated on a salary basis (as defined in the regulations) at a rate not less than $455 per week ($684 per week as of 1/1/20);
- The employee’s primary duty must be managing the enterprise, or managing a customarily recognized department or subdivision of the enterprise;
- The employee must customarily and regularly direct the work of at least two or more other full-time employees or their equivalent; and
- The employee must have the authority to hire or fire other employees, or the employee’s suggestions and recommendations as to the hiring, firing, advancement, promotion, or any other change of status of other employees must be given particular weight.
Administrative Exemption
To qualify for the administrative employee exemption, all of the following tests must be met:
- The employee must be compensated on a salary or fee basis (as defined in the regulations) at a rate not less than $455 per week ($684 per week as of 1/1/20);
- 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 includes the exercise of discretion and independent judgment with respect to matters of significance.
Professional Exemption
To qualify for the learned professional employee exemption, all of the following tests must be met:
- The employee must be compensated on a salary or fee basis (as defined in the regulations) at a rate not less than $455 per week ($684 per week as of 1/1/20);
- The employee’s primary duty must be the performance of work requiring advanced knowledge, defined as work that 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; and
- The advanced knowledge must be customarily acquired by a prolonged course of specialized intellectual instruction.
To qualify for the creative professional employee exemption, all of the following tests must be met:
- The employee must be compensated on a salary or fee basis (as defined in the regulations) at a rate not less than $455 per week ($684 per week as of 1/1/20);
- The employee’s primary duty must be the performance of work requiring invention, imagination, originality or talent in a recognized field of artistic or creative endeavor.
Computer Employee Exemption
To qualify for the computer employee exemption, the following tests must be met:
- The employee must be compensated either on a salary or fee basis (as defined in the regulations) at a rate not less than $455 per week ($684 per week as of 1/1/20) or, if compensated on an hourly basis, at a rate not less than $27.63 an hour;
- The employee must be employed as a computer systems analyst, computer programmer, software engineer or another similarly skilled worker in the computer field performing the duties described below;
- The employee’s primary duty must consist of:
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, the performance of which requires the same level of skills.
Outside Sales Exemption
To qualify for the outside sales employee exemption, all of the following tests must be met:
- The employee’s primary duty must be making sales (as defined in the FLSA), 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
- The employee must be customarily and regularly engaged away from the employer’s place or places of business.
Highly Compensated Employees
Highly compensated employees performing office or non-manual work and paid total annual compensation of $100,000 ($107,432 as of 1/1/20) or more (which must include at least $455 per week, $684 per week as of 1/1/20, 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 identified in the standard tests for exemption (see above).
Blue Collar Workers
The exemptions provided for “white collar” employees do not apply to manual laborers or other “blue collar” workers who perform work involving repetitive operations with their hands, physical skill, and energy. Non-management employees in production, maintenance, construction, and similar occupations such as carpenters, electricians, mechanics, plumbers, iron workers, craftsmen, operating engineers, longshoremen, construction workers, and laborers are entitled to minimum wage and overtime premium pay under the FLSA and are not exempt no matter how highly paid they might be.
Collective Bargaining Agreements
The FLSA provides minimum standards that may be exceeded but cannot be waived or reduced. Employers may, on their own initiative or under a collective bargaining agreement, provide a higher wage, shorter workweek, or higher overtime premium than provided under the FLSA.
Other Exemptions / Exceptions
Agricultural Exemption – Under the FLSA, certain agricultural workers are not required to be paid overtime wages. The definition of agriculture under the FLSA: “Agriculture” includes farming in all its branches and among other things includes the cultivation and tillage of the soil, dairying, the production, cultivation, growing, and harvesting of any agricultural or horticultural commodities (including commodities defined as agricultural commodities in section 1141j (g) of title 12), the raising of livestock, bees, fur-bearing animals, or poultry, and any practices (including any forestry or lumbering operations) performed by a farmer or on a farm as an incident to or in conjunction with such farming operations, including preparation for market, delivery to storage or to market or to carriers for transportation to market.
Dealership Exemption – The FLSA provides an overtime exemption for certain employees, including salespeople, partspeople, and mechanics, working for non-manufacturing establishments engaged in the business of selling automobiles, trucks, farm implements, trailers, boats, or aircraft. Under this exemption, these types of employees are not required to be paid overtime wages. For further details, see this link. The Supreme Court has ruled that service advisors are also covered by this overtime exemption.
Teacher Exemption – Teachers are considered exempt from the overtime requirements under the FLSA professional exemption and do not have to be paid overtime if their primary duty is teaching, tutoring, instructing or lecturing in the activity of imparting knowledge, and if they are employed and engaged in this activity as a teacher in an educational establishment. Exempt teachers include regular academic teachers; kindergarten or nursery school teachers; teachers of gifted or disabled children; teachers of skilled and semi-skilled trades and occupations; teachers engaged in automobile driving instruction; aircraft flight instructors; home economics teachers; and vocal or instrument music teachers. The usual salary and salary basis requirements do not apply to teachers.
Police / Firefighter Exception – The FLSA provides partial and total exemptions from overtime for employees engaged in fire protection or law enforcement. A partial exemption can be found in Section 207(k) of the FLSA which provides that employees engaged in law enforcement may be paid overtime on a “work period” basis. The employer is responsible for setting the “work period.” A “work period” may be from seven consecutive days to 28 consecutive days in length.
Seasonal Recreational Exemption – Under the FLSA, employees who work for certain recreational establishments and in certain seasonal occupations are not required to be paid overtime wages. See this link for the exemption for Seasonal Amusement or Recreational Establishments.
Ministerial – Courts have held that the FLSA includes a ministerial exemption which holds that certain religious workers are not considered employees for purposes of the FLSA. The exemption is delineated in the guidelines issued by the Department of Labor which read:
“Persons such as nuns, monks, priests, lay brothers, ministers, deacons, and other members of religious orders who serve pursuant to their religious obligations in schools, hospitals, and other institutions operated by their church or religious order shall not be considered to be ‘employees.’” Field Operations Handbook, Wage and Hour Division, U.S. Dep’t of Labor, § 10b03(b) (1967). These cases discuss the ministerial exemption – Shaliehsabou v. Hebrew Home and Dole v. Shenandoah Baptist.
