FLSA Regulations: Basic Principles On Employee Overtime Exemptions

(Part 2 of the Wage-Hour Compliance Series)

This Part 2 in our series addresses the challenge that businesses face in complying with the FLSA rules on treating certain employees as "exempt" from the law's overtime pay requirement. The litigation explosion over exemption disputes is a sign that the rules on exemptions are not simple to interpret and apply.

Employers understandably struggle with the question of whether or not a particular employee qualifies for one of the overtime exemptions under the FLSA. The regulations defining the most familiar exemptions (Executive, Administrative, Professional, Outside Sales, and Computer Employee) often seem ambiguous or worse. Making things more challenging, the burden of proof in a contested exemption case is on the employer.

To protect themselves, employers should ensure that every FLSA exemption they claim is fully justified and properly applied. The following basic principles on employee overtime exemptions should be the starting place for an internal review:

An employee is not exempt simply because he or she is paid a salary rather than at an hourly rate, management thinks of the person as a manager or as being indispensable to the business, or because the employee "wants to be" exempt.

There are specific and often detailed criteria which limit the employees to whom exemptions may be applied. It is the employer's legal burden to show that each exemption requirement is met; employees are not required to prove that they are eligible for overtime pay.

Exemption criteria usually apply on an employee-by-employee basis. There is risk in deciding who is exempt based simply upon things like job descriptions, generalizations about what groups of employees do, or conventional wisdom that "everybody" treats a particular position as being exempt.

The U.S. Labor Department and the courts construe exemptions very narrowly. Doubt is routinely resolved against the employer.

The exemptions most often at issue are those for so-called "white collar" employees: executive, administrative, professional, computer and outside sales employees and certain "highly compensated" employees.

The detailed and elaborate regulations actually defining those exemptions are compiled at 29 C.F.R. Part 541. Those regulations were revised extensively in 2004. These are exemptions from the minimum wage, overtime, and timekeeping requirements.

Reminder: In addition to the "duties" tests applicable to those particular exemptions, most of...