Overtime and Minimum Wage Exemption Rules

The exemption from minimum wage and overtime requirements under the Fair Labor Standards Act (FLSA) has a salary threshold that the employee must on a salary or fees base be compensated at least $455 per week ($23,600 per year). In other words, employees paid on an hourly basis do not meet the exemption requirements. Any employee who makes less than the threshold amount will be a nonexempt employee and is therefore entitled to overtime pay. The overtime pay is required regardless of if the employee is paid on an hourly basis or salary basis (and does not meet the following requirement).

Any employee paid at least $455 per week will have to meet one of the following duties tests in order to be classified as an exempt employee. The duties tests are divided into employee type categories. These categories are:  executive, administrative, learned professional, creative professional, teacher, computer, and outside sales employees.

Following is a listing of the new standard tests for executive, administrative, and professional employees:

Executive Employees
  • Primary duty is the management of the enterprise or a recognized department or subdivision.
  • Customarily and regularly directs the work of two or more other employees.
  • Has authority to hire or fire other employees (or recommendations as to hiring, firing, promotion, or other change of status of other employees are given particular weight).
Administrative Employees
  • Primary duty is performing office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers.
  • Primary duty includes the exercise of discretion and independent judgment with respect to matters of significance.

Professional Employees

  • Learned Professionals
    Primary duty is performing office or non-manual work requiring knowledge of an advanced type in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction.
  • Creative Professionals
    Primary duty is the performance of work requiring invention, imagination, originality, or talent in a recognized field of artistic or creative endeavor.

  • Teachers
    Primary duty is teaching, tutoring, instructing, or lecturing in the activity of imparting knowledge as a teacher in an educational establishment by which the employee is employed. The $455 salary test does not apply to teacher exemption.

Additionally, there is an exemption for individuals who earn over $100,000 a year from overtime eligibility. The exemption applies to workers who earn over $100,000 and (1) perform office or non-manual work as their primary duty, and (2) customarily and regularly perform at least one of the exempt duties or responsibilities of an executive, administrative, or professional employee. 

This text is provided with the understanding that ECFA is not rendering legal, accounting, or other professional advice or service. Professional advice on specific issues should be sought from an accountant, lawyer, or other professional.


Follow @ecfa