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Due to federal legislative changes in 2019-2020, the Department of Labor’s salary threshold for white-collar exemptions shifted from $455 a week to $684 a week or $23,660 to $35,568 in annual salary. This shift in federal policy has made many more blue-collar employees eligible for non-exempt status, including overtime eligibility. As a result, many employers are reevaluating FLSA and state overtime rules to ensure they understand which of their employees are overtime exempt.
As we’ll explore in this article, the salary threshold is only one of three major factors determining exempt status. We’ll walk you through the other prerequisites for exempt status to help you ensure your business is in full compliance with FLSA and state overtime compliance requirements.
Federal Requirements for Overtime Exemption
Contrary to popular belief and interpretation of FLSA policy, an employee’s yearly or weekly salary is not the sole factor determining an employee’s overtime exemption status. Although the salary threshold is currently set at $684 a week or $35,568 annually, to maintain exempt status, the employee’s salary must also be guaranteed at a set/minimum amount that cannot be reduced due to variations in work performance (quantity or quality).
In addition to these salary-based conditions for exempt status, an employee’s job responsibilities must primarily include executive, administrative, or professional duties. Below, we’ll provide distilled descriptions to demonstrate which duties and job types meet FLSA conditions:
To meet the requirements for the executive exemption, an employee must direct at least two employees on a regular basis, manage a department/enterprise/subdivision within the business, and be meaningfully involved in the hiring, firing, or promotion/demotion of employees within the business.
To meet the requirements for the administrative exemption, an employee must primarily perform office or non-manual labor that impacts the management and/or business operations of the employer. Additionally, the employee must regularly exercise independent judgment related to significant business matters.
Since the FLSA definition of administrative exemptions is the most nebulous out of all three categories, we’ll provide some concrete employee roles that would likely qualify: payroll and finance staff; accounting and tax staff; marketing, PR, and advertising staff; HR employees, and any others who provide support to “standard” operational and production-oriented employees. As a reminder, most positions that are purely or primarily clerical do not qualify for exempt status.
To meet the requirements for professional exemption, an employee must primarily perform work that requires specialized and advanced education in a particular field, while exercising independent judgment and discretion in significant business-related decisions. Common examples of qualified professional exemptions include lawyers, architects, engineers, doctors, registered nurses, pharmacists, scientists, teachers/instructors, and some creative professions.
State Requirements for Overtime Exemption
Some states, including Alaska, California, Colorado, Michigan, Minnesota, Nevada, New York, Pennsylvania, Vermont, Virginia, and West Virginia, have legislated their own requirements for overtime exemptions. Many states only slightly supplement federal requirements already mandated by FLSA, but some state laws are more involved, including in California, where “double-time” stipulations and workweek day and hour limits impact overtime policy.
As you work to optimize your own company’s compliance practices, be sure to review the three major requirements of federal policy alongside the laws and stipulations that apply within your own state. If you need assistance determining how to classify a particular employee or position type, seek out professional assistance to guide you through the process.
How CAVU HCM Can Help You Navigate Payroll and Compliance
Due to recent policy developments in the US Department of Labor and the Biden Administration, it appears likely that new updates to the exempt status salary threshold are forthcoming. In a related article, we explore the possible implications of these changes and how you can begin to prepare.
Staying up to date on new compliance and labor law policies on a federal and state level can be a challenge for any business attempting to focus on its core day-to-day operations. That’s why CAVU HCM is an ideal option for delegating your compliance and payroll concerns to qualified professionals.
Led by experts in state and federal policy, CAVU HCM’s payroll services can manage your entire payroll process, including time and attendance; yearly filings; application of tax credits; and more. We stay up to date with all of the latest labor law developments to ensure that your company is in full compliance and free of legal, financial, and operational burdens. Contact us today to start our collaboration.
