Understanding Overtime Exemptions Under FLSA
The Fair Labor Standards Act (FLSA) is a federal law with broad coverage, affecting most private and public employees. The FLSA generally requires employers to pay all covered nonexempt employees the statutory minimum wage and overtime pay of at least one and one-half times their regular rates of pay for hours worked in excess of 40 hours in a workweek.
This toolkit provides an overview of the positions that may qualify for an exemption from overtime pay under the FLSA white-collar and industry exemptions.
Under the FLSA, the term "employ" means to "suffer or permit to work," however, some individuals may not fall within that definition. For example, trainees, interns, externs, apprentices and graduate assistants may not be considered employees within the meaning of the FLSA.
Individuals also may not be covered by the FLSA when they volunteer time to religious, charitable, civic, humanitarian or similar nonprofit organizations as a public service and do not expect or receive compensation. See DOL FLSA Advisor: Volunteers.
The FLSA also does not apply to work performed by independent contractors.
If an employment relationship exists, the FLSA applies when either the individual or enterprise coverage rules are met. An employee is covered by the FLSA on an individual basis if he or she is "engaged in commerce or the production of goods for commerce."29 U.S.C. Section 206(a). The rules for enterprise coverage focus on the nature of the employer's business. See DOL Fact Sheet #14: Coverage Under the Fair Labor Standards Act.
Unless an employer can establish that it is not covered by the FLSA or that an exemption from the FLSA applies, employees are presumed to be eligible for overtime. Employers and employees cannot agree to waive coverage of the FLSA. Similarly, in most circumstances, collective bargaining agreements cannot waive coverage of the FLSA.
Overtime Exemptions Under the FLSA
The FLSA Section 13(a)(1) exemptions are often referred to as the white-collar exemptions. To be exempt from overtime, a position must meet the following three criteria:
- A minimum salary threshold (some exceptions apply).
- Payment on a salary basis as defined by the regulations (some exceptions apply).
- A primary duty test that is specific to each exemption.
On Sep. 24, 2019, the U.S. Department of Labor (DOL) issued a final rule that sets a new salary threshold of $684 a week ($35,568 annualized) for the FLSA's white-collar exemptions, effective Jan. 1, 2020. Employers are permitted to use nondiscretionary bonuses and incentive payments (including commissions) paid at least annually to satisfy up to 10% of the standard salary level. *some states may have higher minimums requirements.
An exempt employee must be paid a predetermined and fixed salary that meets the minimum salary requirements in the regulations and that is not subject to reduction because of variations in the quality or quantity of work performed. See Fact Sheet #17G: Salary Basis Requirement and the Part 541 Exemptions Under the Fair Labor Standards Act (FLSA)
In addition to the minimum salary and salary basis requirement, a position must meet certain duties tests specific to each exemption:
- Executive or Supervisor Exemptions
- Administrative Exemption
- Professional Exemption
- Computer Employee Exemption
- Outside Sales Exemption
- Highly Compensated Employees
Combination exemption. When an employee performs a combination of exempt duties that fall under the executive, administrative, professional, outside sales and computer employee exemptions, he or she may qualify under a combination exemption.
When an employee performs a combination of duties that fall under both exempt and nonexempt work, the employee's primary duty will determine whether an overtime exemption applies. The employee's primary duty must be the performance of exempt work in order for the minimum wage and overtime white-collar exemptions to apply. See DOL Opinion Letter FLSA 2005-14.
The FLSA also provides overtime exemptions that apply by industry. Summaries of the more commonly used industry exemptions include the following:
Agricultural activities or operations. The FLSA exempts from minimum wage and overtime pay requirements certain employees who are employed in agriculture or in certain related activities or in certain operations with respect to agricultural or horticultural commodities.
Commissioned sales employees. The FLSA exempts certain commissioned sales employees (often referred to as the "7(i)" exemption) from the FLSA's overtime requirements when all three of the following conditions are met:
- The employee must be employed by a retail or service establishment.
- The employee's regular rate of pay must exceed one and one-half times the applicable minimum wage under Section 6 of the FLSA.
- More than half of the employee's total earnings in a representative period must consist of commissions on goods or services.
Motor carrier employees. The FLSA exempts certain employees covered by the Motor Carrier Act of 1935. This exemption applies to employees who are:
- Employed by a motor carrier or motor private carrier, as defined in 49 U.S.C. Section 13102.
- Drivers, driver's helpers, loaders or mechanics whose duties affect the safety of operation of motor vehicles in transportation on public highways in interstate or foreign commerce.
- Not covered by the small vehicle exception.
Positions Not Eligible for Exemption
There are certain types of positions that the DOL considers to be outside the scope of any exemption and, therefore, eligible for overtime.
Manual laborers or other blue-collar workers "who perform work involving repetitive operations with their hands, physical skill and energy" are entitled to overtime. Examples of such blue-collar workers include "non-management production-line employees and non-management employees in maintenance, construction and similar occupations such as carpenters, electricians, mechanics, plumbers, iron workers, craftsmen, operation engineers, longshoremen, and construction workers."
The white-collar exemptions also do not apply to certain first responders, such as police officers, fire fighters, paramedics, emergency medical technicians, ambulance personnel and rescue workers, "regardless of rank or pay level, who perform work such as preventing, controlling or extinguishing fires of any type; rescuing fire, crime or accident victims; preventing or detecting crimes; conducting investigations or inspections for violations of law; performing surveillance; pursuing, restraining and apprehending suspects; detaining or supervising suspected and convicted criminals, including those on probation or parole; interviewing witnesses; interrogating and fingerprinting suspects; preparing investigative reports; or other similar work."
Inside sales employees are entitled to overtime under the FLSA regulations. The DOL expressly states in the preamble to the regulations that it "does not have statutory authority to exempt inside sales employees from the FLSA minimum wage and overtime requirements under the outside sales exemption."
Generally, paralegals and legal assistants are entitled to overtime. For a discussion of a particular paralegal position the DOL concluded was entitled to overtime, see DOL Opinion Letter FLSA 2005-54.
Many executive and administrative assistants are entitled to overtime. For a discussion of several administrative assistant positions in state employment in which the DOL concluded some were and some were not entitled to overtime, see DOL Opinion Letter FLSA 2006-23NA.
For additional guidance see DOL Wage and Hour Division Final Rulings and Opinion Letters.
State Overtime Laws
A few states, such as California and New York, have overtime exemption criteria that conflict with the FLSA. Multistate employers should check applicable state laws to ensure compliance with both federal and state law. See Multi-state Law Comparison Tool.