Bona fide administrative, executive, professional, and computer-related professional employees, as well as outside sales employees, are exempt “white collar” employees under the Fair Labor Standards Act (FLSA). This means they are not covered by the minimum wage, overtime, and certain recordkeeping requirements of the law. The tests for determining exempt status measure the actual duties and responsibilities of the employee, not the job title. The determination also depends on:
- The employee’s primary duty
- The employee’s level of discretionary authority
- Whether a minimum salary requirement is met
Rules Provide for Salary and Duties Tests
In 2004, the U.S. Department of Labor (DOL) Wage and Hour Division finalized sweeping changes to the regulations defining who is exempt as a “white collar” employee. The regulations updated salary levels used in determining exempt status for the first time since 1975, while the duties tests received their first overhaul since 1949.
The regulations provide that, in general, any employee earning less than $455 a week ($23,660 a year) is a nonexempt employee entitled to overtime pay, whether he or she is paid on an hourly or salary basis. Employees paid a salary above that level have to meet a duties test in order to be classified as an exempt executive, administrative, or professional employee. Employees paid more than $100,000 a year have to meet only one prong of one of the duties tests to qualify as exempt.
2016 Changes Put on Hold
On May 23, 2016, the DOL finalized changes to the white collar exemption rules that were scheduled to increase the weekly exempt standard salary level to $913 and the annual highly paid employee compensation amount to $134,004, with inflation adjustments every three years beginning in 2020. The changes were scheduled to take effect December 1, 2016, but a federal district court judge issued an order blocking the rules’ implementation. The court declared the rules invalid on August 31, 2017.
On October 30, 2017, the U.S. Department of Justice, on behalf of the DOL, filed a notice to appeal the decision. U.S. Secretary of Labor Alexander Acosta explained that the reason why the government decided to appeal the ruling was to ensure that the DOL had the authority to write the overtime rule. On November 6, 2017, the U.S. Court of Appeals for the Fifth Circuit granted the government’s motion to put the case temporarily on hold while the DOL undertakes further rulemaking to determine what the salary level should be.
The DOL has already started the process of updating the white collar exemption rules. On July 26, 2017, the DOL published a Request for Information (RFI) in the Federal Register (82 F.R. 34616) for the white collar exemption. The DOL requested comments on the 2016 revisions to the white collar exemption regulations, including whether the standard salary level set in that rule effectively identifies employees who may be exempt, whether a different salary level would more appropriately identify such employees, the basis for setting a different salary level, and why a different salary level would be more appropriate or effective. The comment period ended on September 25, 2017. The DOL is reviewing more than 200,000 submissions and will use the responses it received and other information it gathers to propose revisions to the regulations.
Until new regulations are proposed and finalized, the currently salary threshold and duties tests remain in effect.
U.S. Department of Labor, Wage and Hour Division
- Overtime Pay Information
- Overtime Pay Litigation
- Overtime Pay: Request for Information
- Public sessions on proposed overtime rule