On May 18, 2016, the Department of Labor (DoL) published a new overtime exemption final rule, updating the Fair Labor Standards Act’s (FLSA) minimum wage and overtime protection standards for exempt employees. The new rule raises the minimum salary that must be paid to workers who qualify for white-collar overtime exemptions and establishes a schedule for regular increases to that minimum. These changes take effect December 1, 2016.

About the Fair Labor Standards Act

The FLSA is a federal law that requires employers to pay workers a minimum wage for all hours worked. The law also requires employers to pay overtime for hours worked beyond 40 in a workweek, unless employees meet certain criteria or exemptions. Workers must meet specific tests for salary level, salary basis and job duties to qualify for white-collar exemptions.

Non-exempt employees receive overtime protection under the FLSA. This means they’re entitled to receive overtime pay at a rate of 1 ½ times their regular pay for all hours worked beyond 40 in a workweek.

Exempt employees do not receive overtime protection under the FLSA. Workers must meet specific criteria established by FLSA Section 13(a)(1), including payment method, pay rate and job duties.

Which Job Duties Qualify for the Final Overtime Rule White-Collar Exemption?

A job title alone does not qualify an employee for white-collar exemptions. Congress has established a duties test, or list of primary duties, workers must perform to qualify for white-collar exemptions in executive, administrative, professional, outside sales or computer positions.

Executive Exemption Duties Test

An employee’s job duties must meet all of these requirements:

  • Primary duty must be managing either the entire enterprise or a division or department of the enterprise in which the worker is employed;
  • Must regularly direct the work of two or more full-time employees, or the equivalent of half-time employees; and
  • Must have authority to hire or terminate employees, or have authority to make recommendations or suggestions about other employees’ change of status such as firing, hiring or promotion.

Administrative Exemption Duties Test

  • Primary duty must be non-manual or office work that directly relates to the management or the general business operations of his or her employer or employer’s customers; and
  • Must include exercising independent judgment and discretion regarding matters of significance.

Professional Exemption Duties Test

The “professional” employee exemption includes creative professionals, learned professionals, employees who practice law or medicine and teachers.

Creative Professional Employee Exemption

  • Primary duty must be work that requires skills such as imagination, invention, originality or talent in a recognized artistic or creative field, including writing, music, graphic arts and acting.

Learned Professional Employee Exemption

  • Primary duty must be work which requires advanced knowledge, is primarily intellectual in nature and requires consistent exercise of judgment and discretion;
  • Must require advanced knowledge in a field of learning or science, such as medicine, pharmacy, law, accounting, theology, biological, chemical or physical sciences, including occupations with a recognized professional status but excluding skilled trades and mechanical arts where an employee may have advanced knowledge but not in a science or learning field; and
  • Specialized academic instruction or training must be a standard requirement for entry into the profession.

Teacher Exemptions

  • Primary duty must be teaching, instructing, tutoring or lecturing to impart knowledge and he or she must be engaged in this activity as an employee and teacher of an educational establishment.
  • Exempt teachers can provide instruction in areas including (but not limited to) regular academics, nursery school or kindergarten, gifted or disabled classes, semi-skilled and skilled occupations or trades, drivers education, aircraft flight instruction, vocal and instrumental music and home economics.

Exemptions for Employees Practicing Medicine or Law

  • An employee is exempt if he or she both holds a valid certificate or license permitting him or her to practice medicine or law and actually works in such a practice.
  • An employee is also exempt if he or she holds an academic degree for the general practice of medicine and is participating in a resident or internship program for the same profession.

Outside Sales Duties Test

An employee’s job duties must meet all of these requirements:

  • Primary duty must be making sales, obtaining contracts or obtaining orders for either services or facilities use which will be paid for by a customer or client. The term “sales” can include a sale or exchange, a contract to sell, a consignment or shipment for sale. This includes the transfer of title for tangible property; and
  • Employee must regularly work outside of his or her employer’s place of business.

Computer Employee Duties Test

Employee must work as a computer programmer, computer systems analyst, software engineer, or other skilled computer position, and his or her primary duty must include:

  • Consulting with users and applying systems analysis procedures and techniques to determine functional specifications for software, hardware or an entire system;
  • Designing, documenting, developing, analyzing, testing, creating or modifying computer programs, systems and prototypes according to system design or user specifications;
  • Designing, testing, documenting, creating or modifying machine operating computer programs; or
  • A combination of these duties that requires the same skill level.

Highly Compensated Employees (HCE) Duties Test

  • Must meet the HCE compensation requirement
  • Primary duty is at least one of the executive, professional or administrative employee exempt duties