Common Exemptions for Salaried Employees – 2nd in a 3-Part Series
Certain employees, under the federal Fair Labor Standards Act (FLSA), are exempt from minimum wage and/or overtime requirements. The most common exemptions apply to executive, administrative, professional and outside sales employees who meet certain salary, duties and responsibilities requirements. These are commonly referred to as the “white collar” exemptions.
With the exception of certain employees, including outside sales employees, most employees must be paid a minimum salary of $455 per week to be exempt. Salaried employees must generally be paid their full salary regardless of the hours they work. And, these employees’ salaries must not be subject to reduction based on the quantity or quality of work.
Although it is a common misconception that employees are exempt from overtime if they are paid a salary, placing an employee on a fixed salary is not enough. In addition to the salary test, employees must meet the duties test to qualify for one of the common white collar exemptions.
The executive exemption applies to management level employees with the primary duty of managing the enterprise, its department or subdivision. These employees customarily and regularly direct the work of two or more other employees. And, they must either have the actual authority to hire or fire, or their recommendations as to hiring, firing or other types of significant employment actions must be given “particular weight.”
The administrative exemption applies to employees whose primary duty consists of performing office or non-manual work directly related to management policies or general operations of the business or the business’s customers. Administrative employees must exercise discretion and independent judgment with respect to matters of significance. Insurance claims adjusters, financial analysts, administrative assistants to business owners and human resources managers will generally qualify for this exemption under the duties test.
The most common type of professional exemption applies to employees who primarily perform work requiring advanced knowledge of science or learning – referred to as “learned professionals.” These employees are registered or certified medical technologists, registered nurses, dental hygienists, physician assistants, and certified public accountants to name a few – in addition to lawyers, doctors or teachers who do not need to meet the salary test. There is also an exemption for creative professionals and computer professionals.
For the outside sales exemption, employees must have the primary duty of making sales or obtaining orders or contracts for services or for the use of facilities. These employees customarily and regularly perform their duties away from the employer’s places of business.
Finally, there is a special category of exemption for highly compensated employees – those whose annual compensation is at least $100,000. These employees are deemed exempt provided they customarily and regularly perform any one or more of the exempt duties and perform office or non-manual work.
In the next article, I will discuss a hot topic: employees whose pay includes tips.