White-collar employee exemption under the Fair Labor Standards Act
Under the Fair Labor Standards Act “FLSA,” certain employees are exempt from minimum wage and overtime payment. These employees include bona fide executive, administrative, professional, and outside sales employees as well as certain computer employees.
Employees must meet the salary basis and salary level tests in addition to the job duties test. This means that the employee must be paid on a fixed salary for the year, such that the employee “regularly receives a predetermined amount of compensation each pay period on a weekly, or less frequent, basis” of at least $455 per week.
The job duties of each aforementioned type of employee is briefly described below, as explained further by the DOL. For more information, please see Fact Sheet #17G, describing the white-collar employee exemption under the FLSA.
Executive employees must meet all of the following tests:
- The primary duty is to manage the enterprise or manage a recognized department or subgroup of the enterprise
- The employee must ordinarily and habitually direct the work of at least two or more other full-time employees
- The employee must have the authority to hire and fire other employees, or the employee’s opinion on such matters related to hiring, firing, advancement, promotion or other changes in an another employee’s status must be given particular weight.
Administrative employees must meet all of the following tests:
- The primary duty is to perform office or non-manual work that is directly associated with the management or general business operation of the employer or the employer’s customers
- The employee’s primary duty must include his or her personal exercise of discretion and independent judgment as to significant matters.
There are two types of professional employees, learned professional and creative professional, both of which are addressed here.
Learned professionals must meet all of the following tests:
- The primary duty is work requiring advanced knowledge, defined as work that is predominantly intellectual and includes work that requires the consistent exercise of discretion and judgment;
- The advanced knowledge is in a field of science or learning; and
- The advanced knowledge must be customarily acquired by a prolonged course of specialized intellectual instruction.
Creative professionals must have the primary duty of performing work requiring invention, imagination, originality, or talent in a recognized field of artistic or creative endeavor.
Computer professional employees
- Computer professionals must meet all of the tests described below. However, this exemption doesn’t include computer employees engaged in the manufacture or repair of computer hardware or related equipment. This exception doesn’t apply to engineers, drafters, or other employees skilled in computer aided design software who are not primarily engaged in computer systems analysis and programming or other occupations described below.
- The employee must be paid either on a salary or fee basis of at least $455 a week or if paid hourly, at least $27.63 an hour.
- The employee works as a computer systems analyst, computer programmer, software engineer, or other similarly skilled worker in the computer field performing the duties described below, which is the employees primary duty:
- The application of systems analysis techniques and procedures, including consulting with users to determine hardware, software or system functional specifications
- 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
- The design, documentation, testing, creation or modification of computer programs related to machine operating systems
- Or a combination of the aforementioned duties, the performance which requires the same level of skills.
Outside sales employees
The outsides sales exemption does not require a salary requirement to be met but does require the following tests to be met in order to apply:
- The primary duty must be making sales or obtaining orders or contracts for services or for the usage of facilities of which a consideration will be paid by the client or customer
- The employee must customarily and regularly be engaged in work away from the employer’s place or places of business.