FLSA—Overtime Pay for Professional Employees

The Fair Labor Standards Act (FLSA) requires that most employees in the United States be paid at least the federal minimum wage for all hours worked and overtime pay at time and one-half the regular rate of pay for all hours worked over 40 hours in a workweek.

However, the FLSA also provides various exemptions from minimum wage and overtime payment provisions, the most common of which are the “white collar” exemptions. The white collar exemptions apply mainly to executive, administrative and professional (EAP) employees, but they also include outside sales personnel and certain computer and highly compensated employees (HCEs).

Department of Labor (DOL) Fact Sheet #17D provides guidance for employers on the specific requirements for exemption as a bona fide professional employee. This Compliance Overview includes the guidance in Fact Sheet #17D.

THE WHITE COLLAR EXEMPTIONS

To qualify for a white collar exemption (including the professional exemption), an employee must generally satisfy the following three tests:

  1. The salary basis test: The employee must be paid on a salary basis that is not subject to reduction based on the quality or quantity of work (rather than, for example, on an hourly basis);
  2. The salary level test: The employee must receive a salary at a rate not less than $455 per week (note that proposed regulations would increase this salary level to $679 per week in 2020); and
  3. The duties test: The employee’s primary duty must involve the kind of work associated with the exempt status sought (such as executive, administrative or professional work).

Additional information concerning these exemptions is available in DOL Fact Sheets #17A-G.

There are two general types of exempt professional employees: learned professionals and creative professionals. In addition, the exemption for professional employees also covers teachers and the practice of law or medicine.

THE LEARNED PROFESSIONAL EXEMPTION

To qualify for the learned professional employee exemption, all of the following tests must be met:

  • The employee must be compensated on a salary or fee basis at a rate not less than $455* per week;
  • The employee’s primary duty must be the performance of work requiring advanced knowledge (defined below);
  • The advanced knowledge must be in a field of science or learning; and
  • The advanced knowledge must be customarily acquired by a prolonged course of specialized intellectual instruction.

Primary Duty
“Primary duty” means the principal, main, major or most important duty that the employee performs. Determination of an employee’s primary duty must be based on all the facts in a particular case, with the major emphasis on the character of the employee’s job as a whole.

Work Requiring Advanced Knowledge
“Work requiring advanced knowledge” means work that is predominantly intellectual in character, and that includes work requiring the consistent exercise of discretion and judgment. Professional work is, therefore, distinguished from work involving routine mental, manual, mechanical or physical work. A professional employee generally uses the advanced knowledge to analyze, interpret or make deductions from varying facts or circumstances. Advanced knowledge cannot be attained at the high school level.

Field of Science or Learning
Fields of science or learning include law, medicine, theology, accounting, actuarial computation, engineering, architecture, teaching, various types of physical, chemical and biological sciences, pharmacy, and other occupations that have a recognized professional status and are distinguishable from the mechanical arts or skilled trades where the knowledge could be of a fairly advanced type, but is not in a field of science or learning.

Customarily Acquired by a Prolonged Course of Specialized Intellectual Instruction
The learned professional exemption is restricted to professions where specialized academic training is a standard prerequisite for entrance into the profession. The best evidence of meeting this requirement is having the appropriate academic degree.
However, the word “customarily” means the exemption may be available to employees in these professions who have substantially the same knowledge level and perform substantially the same work as the degreed employees, but who attained the advanced knowledge through a combination of work experience and intellectual instruction. This exemption does not apply to occupations in which most employees acquire their skill by experience rather than by advanced specialized intellectual instruction.

CREATIVE PROFESSIONAL EXEMPTION

To qualify for the creative professional employee exemption, all of the following tests must be met:

  • The employee must be compensated on a salary or fee basis (as defined in the regulations) at a rate not less than $455* per week;
  • The employee’s primary duty must be the performance of work requiring invention, imagination, originality or talent in a recognized field of artistic or creative endeavor.

Invention, Imagination, Originality or Talent
This requirement distinguishes the creative professions from work that primarily depends on intelligence, diligence and accuracy. Exemption as a creative professional depends on the extent of the invention, imagination, originality or talent exercised by the employee. Whether the exemption applies, therefore, must be determined on a case-by-case basis.

The requirements are generally met by actors, musicians, composers, soloists, certain painters, writers, cartoonists, essayists, novelists and others as set forth in the regulations. Journalists may satisfy the duties requirements for the creative professional exemption if their primary duty is work requiring invention, imagination, originality or talent. However, journalists are not exempt creative professionals if they only collect, organize and record information that is routine or already public, or if they do not contribute a unique interpretation or analysis to a news product.

Recognized Field of Artistic or Creative Endeavor
This includes such fields as, for example, music, writing, acting and the graphic arts.

TEACHERS

Teachers are exempt if:

  • Their primary duty is teaching, tutoring, instructing or lecturing in the activity of imparting knowledge; and
  • They are employed and engaged in this activity as a teacher in an educational establishment.

Exempt teachers include, but are not limited to, regular academic teachers; kindergarten or nursery school teachers; teachers of gifted or disabled children; teachers of skilled and semi-skilled trades and occupations; teachers engaged in automobile driving instruction; aircraft flight instructors; home economics teachers; and vocal or instrument music teachers.

The salary level and salary basis requirements do not apply to bona fide teachers. Having a primary duty of teaching, tutoring, instructing or lecturing in the activity of imparting knowledge includes, by its very nature, exercising discretion and judgment.

PRACTICE OF LAW OR MEDICINE

An employee holding a valid license or certificate permitting the practice of law or medicine is exempt if the employee is actually engaged in that practice. An employee who holds the requisite academic degree for the general practice of medicine is also exempt if he or she is engaged in an internship or resident program for the profession. The salary level and salary basis requirements do not apply to bona fide practitioners of law or medicine.

HIGHLY COMPENSATED EMPLOYEES

Highly compensated employees performing office or non-manual work and paid total annual compensation of $100,000 or more (which must include at least $455* per week paid on a salary or fee basis) are exempt from the FLSA if they customarily and regularly perform at least one of the duties of an exempt EAP employee identified in the standard tests for exemption.

There are two general types of exempt professional employees: learned professionals and creative professionals.

Need some direction?

Touch base with our Employee Benefits team.

Request an appointment today