FLSA White Collar Exemptions
The FLSA establishes minimum and overtime wage payment protections for most workers in the United States . However , the FLSA also offers a range of minimum wage and overtime exemptions for certain workers . The white collar exemptions are minimum wage and overtime pay exemptions available to certain administrative , professional , outside sales , computer and highly compensated employees .
To qualify for the white collar exemption , an employee must meet a salary basis test , a salary level test and a duties test . An employee must meet all three tests in order to be exempt from FLSA minimum wage or overtime pay requirements .
The salary basis test is used to make sure the employee is paid a predetermined and fixed salary that is not subject to reduction due to variations in the quality or quantity of work .
The salary level test is used to ensure that the employee meets a minimum specified amount to qualify for the exemption . This salary threshold provides employers with an objective and efficient way to determine whether an employee qualifies for a white collar exemption .
The duties test requires that the employee ’ s job duties conform to executive , administrative or professional duties , as defined by law . This analysis requires a more thorough evaluation of whether an employee can be classified in one of the categories mentioned above ( administrative , professional , outside sales , computer and highly compensated employee )
Higher Salary Threshold Requirement
The final rule increases the minimum salary level of $ 455 per week ($ 23,660 per year ) to $ 913 per week or $ 47,476 per year . The new salary level represents the 40th percentile of wages earned by workers in the lowest-wage census region in the United States ( currently the South ) for a full-year worker .
The final rule also increases the $ 100,000 salary level for highly compensated individuals to $ 134,004 per year — the 90th percentile of wages earned by full-time workers across the entire United States .
These higher salary levels will be updated every three years to maintain the salary level at their corresponding 40th or 90th percentiles . The first automatic rate update is expected by Jan . 1 , 2020 . The DOL will publish updated rates in the Federal Register and on the Wage and Hour Division ’ s website at least 150 days before their effective date .
Calculating
Employee Wages
Administrative , Executive and Professional Employees The final rule will allow , for the first time , non-discretionary bonuses and incentive payments ( including commissions ) to be used to satisfy up to 10 percent of an employee ’ s standard salary level . This may include the payment of nondiscretionary incentive bonuses tied to productivity and profitability . Non-discretionary bonuses and incentive payments may be used if they are paid on a quarterly basis , but more frequent payments are acceptable . However , the DOL will allow employers to make some “ catch-up payments .”
The DOL will also allow employers to use significantly large bonuses toward 10 percent of the required salary amount .
This Compliance Bulletin is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice . Readers should contact legal counsel for legal advice .
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