As discussed in the last two posts, federal overtime rules regulate who must be paid overtime rates and when those rates apply. With few exceptions, to be exempt an employee must be paid at least $23,600 per year ($455 per week), and be paid on a salary basis, and also perform exempt job duties. (The Department of Labor is considering raising this minimum rate to $970 per week and the high salary test to $122,148.)
Employees are usually non-exempt (meaning overtime must be paid) unless they fall into one of these categories:
Salary level: Employees who are paid less than $23,600 per year ($455 per week) are nonexempt, while employees who earn more than $100,000 per year are almost certainly exempt.
Administrative employees: Administrative employees must make at least $455 per 40-hour work week. Their work must be office or non-manual work, must be directly related to management or general business operations of the employer or the employer’s customers, and also must primarily involve independent judgment and discretion about significant matters.
Executive employees: Executive employees must make at least $455 per 40-hour work week. They must regularly supervise two or more other employees, have some genuine input into the job status of other employees (such as hiring, firing, promotions, or assignments), and also must have management as the primary duty of the position.
Computer Employees: Computer employees must make at least $455 per 40-hour work week or be paid at least $27.63 per hour. They must apply system analysis techniques and procedures including consulting with users to determine hardware, software, or system functional specifications and design, development, documentation, analysis, creation, testing, or modification of computer systems or programs.
Exempt Professionals: The traditional “learned professions” are generally exempt. These include lawyers, doctors, dentists, teachers, architects, and clergy. Also included are registered nurses (but not LPNs), accountants (but not bookkeepers), engineers who have engineering degrees or the equivalent and perform work of the sort usually performed by licensed professional engineers, actuaries, scientists (but not technicians), pharmacists, and other employees who perform work requiring “advanced knowledge” similar to that historically associated with the traditional learned professions.
Professionally exempt work must be predominantly intellectual, require specialized education, and involve the exercise of discretion and judgment. Professionally exempt workers must have education beyond high school (and usually beyond college) in fields that are more “academic” than the mechanical arts or skilled trades.
Creative professionals: This includes actors, musicians, composers, writers, cartoonists and some journalists. It is meant to include employees who contribute a unique interpretation or analysis in jobs whose work requires invention, imagination, originality or talent.
It’s important to remember that just because you pay someone a salary doesn’t mean they are exempt from overtime. If your employee doesn’t fall into any of these categories, make sure they are paid for hours above and beyond the 40 per week or your state requirement, whichever is more stringent.