FAIR LABOR STANDARDS ACT
and NONPROFIT ORGANIZATIONS
DMAI Policy Brief on the Announced Rule Change & Review of Current FLSA Law
ISSUED OCTOBER 2016
NEW RULE CHANGES
On May 18, 2016, President Obama and Department of
Labor Secretary Perez announced the publication of
the Department of Labor’s final rule updating the
overtime regulations. Barring legislative action to
the contrary, the final rule will become effective on
December 1, 2016.
salary threshold
The final rule updates the
standard salary level under
which most “white collar”
workers are entitled to overtime
compensation raising it from
$455 a week to $913 a week
effective December 1, 2016.
This works out to an increase of
an annual salary from the current
$23,660 for a full-year worker to $47,476 for a full-year
worker). This new number represents an amount equal
to the 40th percentile of weekly earnings of full-time
salaried workers in the lowest wage Census region,
currently the South (Southeast and Southwest regions
combined).
The rule also increases the total annual
compensation requirement for highly
compensated employees raising it from
$100,000 to $134,004. This number represents
the annual equivalent of the 90th percentile of
full-time salaried workers nationally.
The overtime rule broadens the definition of
salary basis to allow nondiscretionary bonuses and
incentive payments (including commissions) to satisfy
up to 10 percent of the standard salary test requirement.
automatic update
The salary threshold will
automatically update every
three years, based on wage
growth over time. The next
increase is January 1, 2020.
The reason for this automatic
increase is to eliminate the
DMAI POLICY BRIEF
long duration of time between adjustments and to
provide predictability. At this time, the salary threshold
in 2020 is projected to be $51,168 and the highly
compensated employee threshold is projected to be
$147,524.
options for compliance
Employers have a range of options for responding
to the changes to the salary level including the
following:
üüRaise salary and keep the employee exempt from
overtime: Employers may choose to raise the
salaries of employees to at or above the salary level
to maintain their exempt status, if those employees
meet the duties test (that is, the duties are truly
those of an executive, administrative or professional
employee).
This option may be best for employees who have
salaries close to the new salary level and regularly
work overtime.
üüPay overtime in addition to the employee’s current
salary when necessary: Employers also can continue
to pay their newly overtime-eligible
employees the same salary, and pay
them overtime whenever they work
more than 40 hours in a week.
This option may be best for
employees who work 40 hours or
fewer in a typical workweek, but
have occasional spikes that require
overtime for which employers can
plan and budget the extra pay during those periods.
Note - that there is no requirement to convert
employees from salaried to hourly in order to
calculate their overtime pay!
üüEvaluate and realign hours and staff workload:
Employers will need to ensure that workload
distribution, time and staffing levels are all managed
appropriately for their “white-collar” workers who
earn below the salary threshold.
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This option may require employers to hire additional
workers.
üüThe fluctuating work week method: The Employer
guarantees the employee a regular salary every
week, even when the employee works less than 40
hours. When the employee exceeds 40 hours, the
employer pays an overtime premium – but instead
of time-and-a-half, the overtime premium is only
half the employees hourly rate.
As an example, think about paying a salary of $500
per week. In a week when the salaried worker puts
in 45 hours, the worker’s hourly rate is $11.11 per
hour. Half that hourly rate is $5.56 per hour, which
means $27.80 for the five hours of overtime.
On the plus side, this method costs the employer
one-third of what straight overtime would
cost and it allows employees more predictable
paychecks and continued flexibility. But keep in
mind that calculating the variable overtime rates
can place a burden on payroll and accounting
staff. You will also need to figure out a base salary
acceptable to both parties. In addition, employees
under this approach must have noticeable and
consistent variations in weekly hours. Legal
assistance may be required in implementing a
fluctuating workweek approach.
Nothing in the Fair Labor Standards Act – or in the
new rules – requires the choice between flexible
work arrangements or opportunities for career
advancement and complying with basic labor
standards. There is no requirement that a worker
must have a predetermined schedule, and nothing
prohibits working whenever, wherever or however
the worker and the employer agree.
Although the FLSA requires that employers keep certain
records to ensure that workers get paid the wages they
earn and are owed, it’s up to the employer to choose
the method that works best
for them and the needs
of their workforce.
There’s no requirement
that employees “punch
in” and “punch out.”
Employers have
flexibility in designing
systems to make sure
appropriate records are
kept to track the number
of hours worked each day.
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effective date
The final rule will become effective on December 1,
2016.
resources
U.S. Department of Labor
•
Overtime Final Rule and The Nonprofit Sector:
https://www.dol.gov/sites/default/files/overtimenonprofit.pdf
•
Guidance for Nonprofit Organizations Paying
Overtime Under The FLSA: https://www.dol.gov/
whd/overtime/final2016/nonprofit-guidance.pdf
•
June 7, 2016 Webinar for Nonprofits: https://www.
dol.gov/whd/overtime/final2016/webinars.htm
•
Questions and Answers On the New Overtime
Rule: https://www.dol.gov/whd/overtime/
final2016/webinarfaq_np.htm
•
FLSA Overtime Calculator Advisor: http://webapps.
dol.gov/elaws/otcalculator.htm
National Council of Nonprofits:
•
Breaking Down Your Nonprofit’s Obligation to Pay
Overtime Under the New Federal Rules: https://
www.councilofnonprofits.org/tools-resources/
breaking-down-your-nonprofits-obligation-payovertime-under-the-new-federal-rules#sthash.
VEdnE2e7.dpuf
•
Overtime Compliance Flowchart: https://
www.councilofnonprofits.org/sites/default/
files/documents/Overtime%20Compliance%20
Flowchart.pdf
Center for Nonprofit Advancement:
•
Changes on the Horizon for Overtime Laws:
https://www.nonprofitadvancement.org/blog/
changes-horizon-overtime-laws
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CURRENT LAW
minimum wage and overtime
protections
Most employees of nonprofit organizations are entitled
to the minimum wage and overtime protections by the
Fair Labor Standards Act (FSLA).
Note: The current Federal Minimum Wage is $7.25
per hour. If the state minimum wage in your state is
higher, employees are entitled to be paid the higher
minimum wage rate. Your state minimum wage as well
as other helpful information and posters concerning
minimum wage can be found here:
http://www.minimum-wage.org
Unless exempt, employees must receive overtime pay
for hours worked over 40 in a workweek at a rate not
less than time and one-half their regular rates of pay.
There is no limit in the number of hours an employee
aged 16 and older may work in any workweek. Overtime
pay is not required for work on Saturdays, Sundays,
holidays, or regular days of rest, unless overtime is
worked on such days. The recently announced rule
change does not change any of this.
classifying workers
Workers are either volunteers, employees, or
independent contractors. Only non-exempt employees
are entitled to be paid for overtime so each position
needs to be evaluated. When looking at your employees
the default should be that every position is nonexempt - unless it falls into one of three “white collar’
exemptions: administrative, executive or professional.
You may want to start by eliminating those positions
that are definitely exempt from overtime. Remember
that state law may require you to include additional
employees in the “non-exempt” category, but the
federal salary threshold is a key consideration.
Here is a link to three worksheets provided by the
National Council of Nonprofits that you can use to
help determine whether your workers qualify for a bona
fide ‘white collar’ exemption from overtime. If they do
not fall into an exempt classification, then they are nonexempt worker.
https://www.councilofnonprofits.org/sites/default/files/
documents/Overtime%20Exemption%20Worksheets.pdf
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Once you’ve conducted this analysis it is a good idea to
list the classification (exempt or non-exempt) of every
employee right on their position description. This is also
a good opportunity to ensure the position description
is up to date as well. This disclosure helps to manage
employees’ expectations about whether they are
entitled to be paid for overtime and is a good reminder
for management, too. Remember only employees are
entitled to overtime. An organization may have other
types of workers.
volunteers
Volunteers are workers who do not anticipate being
paid, and in fact are not compensated for their
labor. However, be careful: Some employees are so
enthusiastic (and community needs are so great)
that they offer to “volunteer” beyond their regularly
scheduled work hours. If so, make sure their volunteer
responsibilities are completely different from their
responsibilities as an employee – otherwise their
volunteer hours, when added to their regular work
hours, may push them over 40 hours in a single week.
It’s a good idea to document in writing the nature of
their volunteer work, and that they voluntarily agreed to
provide services for the nonprofit with no expectation
of being paid for their volunteer service. Be sure to have
them sign the documentation in order to protect the
nonprofit from overtime liability.
interns
“Interns” may be either volunteers (unpaid) or
employees (paid), so document each intern’s
classification. Interns can sign a memo or letter
acknowledging their status. If an intern receives a
stipend, this is inconsistent with the “volunteer” status.
Also, beware of calling “trainees” as an unpaid intern the state or federal Department of Labor may decide
that your “volunteer” intern is actually an employee.
americorps and vista workers
Americorps and VISTA workers are neither employees
nor volunteers. They are “participants” and special
rules apply. Please contact the program to understand
those rules.
independent contractors
Independent contractors are workers whose hours
and work responsibilities are not controlled by the
organization. Think about hiring a plumber. You hire a
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plumber as needed to provide their expertise and the
plumber brings their own tools and schedules the work
at his/her convenience. You don’t directly supervise
the plumber, put the plumber on your payroll, or pay
the plumber’s insurance, withholding taxes, or benefits.
Instead, the plumber completes the repair and sends
you an invoice. It is important that a written agreement
exists to underscore the independent contractor status
and include what they are to be paid. Caution should be
exercised when classifying individuals as independent
contractors rather than employees as it is becoming
increasingly difficult to establish that someone fits the
independent contractor classification.
enterprise and individual test for
identifying non-exempt employees
employees
Even if a nonprofit organization is not covered on
an enterprise basis as described above, it may have
individual employees who are covered individually and
therefore covered by FLSA. An employee who engages
in interstate commerce or in the production of goods
for interstate commerce or in the protection of goods
for interstate commerce is covered by the FLSA and is
entitled to overtime pay for time worked over 40 hours
in a week.
The IRS defines employees as “anyone who performs
services for you if you can control what will be done
and how it will be done.” Unless they are exempt,
employees who work over 40 hours in a single work
week are entitled to overtime.
hourly workers
Generally, hourly workers are entitled to overtime regardless
of how much they make if they work more than 40 hours
– nothing in the new rule changes that. Some jobs, such
as the following, are exempt from minimum wage law, and
can be paid an hourly wage that is lower than the Federal
Minimum Wage under certain circumstances.
üüEmployees who receive tips (such as waitresses)
can be paid less than the Minimum Wage so long
as the tips they receive add up to more than the
minimum wage every hour.
üüEmployees working at seasonal establishments
like summer camps may sometimes be paid less
than the Federal Minimum Wage.
üüWorkers under the age of 18 may receive subMinimum Wage pay for a training period of up to
90 days.
üüSome institutions like nonprofits and universities
may obtain a certificate to pay workers under the
minimum wage.
üüThe new announced rule changes have no impact
on the pay or overtime of workers paid hourly.
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There are two ways that an individual employee may be
covered under the FLSA and entitled to its protections:
individual coverage and enterprise coverage. A
nonprofit organization is not considered a covered
enterprise unless it engages in ordinary commercial
activities that result in sales made or business done that
meets the $500,000 threshold. If a nonprofit meets
this threshold its employees are entitled to overtime
for work performed over 40 hours a week regardless of
how the employee spends their time.
The following discusses these points in more detail.
✦✦Enterprise coverage. Generally speaking, a covered
enterprise is one with at least two employees an
annual volume of sales made or business done of
organizations (501(c)3) are not covered enterprises
under the FLSA unless they engage in ordinary
commercial activities that result in sales made or
business done that meets that threshold.
Ordinary commercial activities mean operating a
business, like a gift shop. Activities such as providing
free temporary shelter, free clothing or free food
to homeless persons, however, are not considered
ordinary commercial activities; rather, they are
charitable in nature and enterprise coverage does
not apply.
Note: Employees engaged in the commercial
activities are covered by the FLSA on an enterprise
basis. Employees of the organization’s charitable
activities are not covered on an enterprise basis
since those activities do not have a business
purpose. However, an employee who spends a
considerable amount of time fundraising on the
phone and taking credit card donations from other
states would be individually covered – see the next
section concerning Individual Coverage.
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✦✦Individual coverage. Organizations that don’t
meet the tests to be covered on an enterprise
basis likely still have employees who are covered
individually. An employee who engages in interstate
commerce is covered by the FLSA. Such activities
include making out-of-state phone calls; mailing
information or conducting business via the U. S.
mail; ordering or receiving goods from an out-ofstate supplier; handling credit card transactions; or
performing the accounting or bookkeeping for such
activities.
Examples of covered employees who are engaged in
interstate commerce include:
üüAn office employee who uses a telephone, facsimile
machine, the U.S. mail, or a computer e-mail system
to communicate with persons in another state.
üüAn employee who drives or flies to another state
while performing his or her job duties.
üüAn employee who unloads goods which came from
an out of state supplier.
exempt salaried employees
The FLSA provides an exemption from both minimum
wage and overtime pay for employees employed as
bona fide executive, administrative, professional and
outside sales employees. To qualify for exemption,
employees generally must meet certain tests regarding
their job duties and be paid on a salary basis. Job titles
do not determine exempt status.
✦✦Executive Exemption.
To qualify for the executive employee exemption,
all of the following tests must be met.
üüThe employee must be compensated on a salary
basis (as defined in the regulations) at a rate not less
than $455 per week.
üüThe employee’s primary duty must be managing the
enterprise, or managing a customarily recognized
department or subdivision of the enterprise.
•
“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.
•
Generally, “management” includes, but is not
limited to, activities such as interviewing, selecting,
and training of employees; setting and adjusting
their rates of pay and hours of work; directing
the work of employees; maintaining production
or sales records for use in supervision or control;
appraising employees’ productivity and efficiency
for the purpose of recommending promotions
or other changes in status; handling employee
complaints and grievances; disciplining employees;
planning the work; determining the techniques
to be used; apportioning the work among the
employees; determining the type of materials,
supplies, machinery, equipment or tools to be used
or merchandise to be bought, stocked and sold;
controlling the flow and distribution of materials or
merchandise and supplies; providing for the safety
and security of the employees or the property;
planning and controlling the budget; and monitoring
or implementing legal compliance measures.The
phrase “a customarily recognized department or
subdivision” is intended to distinguish between a
mere collection of employees assigned from time to
time to a specific job or series of jobs and a unit with
permanent status and function.
üüAn employee such as a cashier or waitress who uses
an electronic device which authorizes a credit card
purchase.
Furthermore, employees of businesses that are engaged
in interstate commerce or instrumentalities of interstate
commerce are also generally covered (examples
include railroads, highways and city streets, pipe lines,
telephone and/or electrical transmission lines, airports,
bus/truck/steamship terminals, radio or TV stations
and river/streams/waterways over which interstate or
foreign commerce regularly moves).
Employees who perform support functions for these
instrumentalities of interstate commerce are so closely
related to interstate commerce that they are also
considered to be engaged in interstate commerce. It
does not matter who employs these workers - it is the
work that is important (examples include a security
worker at an airport, a custodian who works for a
janitorial contractor which cleans a bus terminal or a
laborer or mechanic who performs maintenance or
repair work or improvements to a city street).
The Department of Labor does not assert individual
coverage for employees who perform this type of
work only on occasion, and for an insubstantial amount
of time.
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üüThe employee must customarily and regularly direct
the work of at least two or more other full-time
employees or their equivalent.
•
The phrase “customarily and regularly” means greater
than occasional but less than constant; it includes
work normally done every workweek, but does not
include isolated or one-time tasks.
•
The phrase “two or more other employees” means
two full-time employees or their equivalent. For
example, one full-time and two half-time employees
are equivalent to two full-time employees. The
supervision can be distributed among two, three
or more employees, but each such employee must
customarily and regularly direct the work of two or
more other full-time employees or the equivalent.
For example, a department with five full-time
nonexempt workers may have up to two exempt
supervisors if each supervisor directs the work of two
of those workers.
üüThe employee must have the authority to hire or
fire other employees, or the employee’s suggestions
and recommendations as to the hiring, firing,
advancement, promotion or any other change
of status of other employees must be given
particular weight.
•
Factors to be considered in determining whether
an employee’s recommendations as to hiring, firing,
advancement, promotion or any other change of
status are given “particular weight” include, but are
not limited to, whether it is part of the employee’s
job duties to make such recommendations, and
the frequency with which such recommendations
are made, requested, and relied upon. Generally,
an executive’s recommendations must pertain to
employees whom the executive customarily and
regularly directs. It does not include occasional
suggestions. An employee’s recommendations may
still be deemed to have “particular weight” even if a
higher level manager’s recommendation has more
importance and even if the employee does not have
authority to make the ultimate decision.
✦✦Administrative Exemption.
To qualify for the administrative employee
exemption, all of the following tests must be met.
üüThe employee must be compensated on a salary or
fee basis (as defined in the regulations) at a rate not
less than $455 per week;
üüThe employee’s primary duty must be the
performance of office or non-manual work directly
related to the management or general business
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operations of the employer or the employer’s
customers.
•
“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 “directly related to management or general
business operations” includes, but is not limited
to, work in functional areas such as tax; finance;
accounting; budgeting; auditing; insurance; quality
control; purchasing; procurement; advertising;
marketing; research; safety and health; personnel
management; human resources; employee benefits;
labor relations; public relations; government
relations; computer network, Internet and database
administration; legal and regulatory compliance; and
similar activities.
•
To meet the “directly related to management or
general business operations” requirement, an
employee must perform work directly related to
assisting with the running or servicing of the business,
as distinguished, for example from working on a
manufacturing production line or selling a product in
a retail or service establishment.
•
An employee may qualify for the administrative
exemption if the employee’s primary duty is
the performance of work directly related to the
management or general business operations of the
employer’s customers. Thus, employees acting as
advisors or consultants to their employer’s clients or
customers — as tax experts or financial consultants,
for example — may be exempt.
üüThe employee’s primary duty includes the exercise
of discretion and independent judgment with
respect to matters of significance.
•
In general, the exercise of discretion and independent
judgment involves the comparison and the evaluation
of possible courses of conduct and acting or making
a decision after the various possibilities have been
considered. The term must be applied in the light
of all the facts involved in the employee’s particular
employment situation, and implies that the employee
has authority to make an independent choice, free
from immediate direction or supervision. Factors to
consider include, but are not limited to: whether the
employee has authority to formulate, affect, interpret,
or implement management policies or operating
practices; whether the employee carries out major
assignments in conducting the operations of the
business; whether the employee performs work that
affects business operations to a substantial degree;
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whether the employee has authority to commit the
employer in matters that have significant financial
impact; whether the employee has authority to waive
or deviate from established policies and procedures
without prior approval, and other factors set forth in
the regulation. The fact that an employee’s decisions
are revised or reversed after review does not mean
that the employee is not exercising discretion and
independent judgment. The exercise of discretion
and independent judgment must be more than the
use of skill in applying well-established techniques,
procedures or specific standards described in
manuals or other sources.
•
The term “matters of significance” refers to the
level of importance or consequence of the work
performed. An employee does not exercise discretion
and independent judgment with respect to matters
of significance merely because the employer will
experience financial losses if the employee fails to
perform the job properly. Similarly, an employee who
operates very expensive equipment does not exercise
discretion and independent judgment with respect
to matters of significance merely because improper
performance of the employee’s duties may cause
serious financial loss to the employer.
✦✦Professional Employees Exemption.
There are two general types of exempt professional
employees: learned professionals and creative
professionals.
✦✦Learned Professional Exemption.
To qualify for the learned professional
employee exemption, all of the following
tests must be met.
üüThe employee must be compensated on a salary
or fee basis (as defined in the regulations) at a
rate not less than $455 per week.
üüThe employee’s primary duty must be the
performance of work requiring advanced
knowledge, defined as work which is
predominantly intellectual in character and
which includes work requiring the consistent
exercise of discretion and judgment.
•
•
“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” means
work which is predominantly intellectual in
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character, and which 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.
üüThe advanced knowledge must be in a 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.
üüThe advanced knowledge must be 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 such 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.
üüThe employee must be compensated on a salary
or fee basis (as defined in the regulations) at a
rate not less than $455 per week.
üüThe 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.
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•
“Invention, imagination, originality or talent”
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.
•
“Recognized field of artistic or creative endeavor”
includes such fields as music, writing, acting and
the graphic arts.
✦✦Outside Sales Exemption.
To qualify for the outside sales employee
exemption, all of the following tests must be met.
üüThe employee’s primary duty must be making
sales, obtaining orders or contracts for
services or for the use of facilities for which
a consideration will be paid by the client or
customer.
•
“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.
•
“Sales” includes any sale, exchange, contract to sell,
consignment for sales, shipment for sale, or other
disposition. It includes the transfer of title to tangible
property, and in certain cases, of tangible and
valuable evidences of intangible property.
•
“Obtaining Orders or Contracts for Services or for
the Use of Facilities” includes the selling of time on
radio or television, the solicitation of advertising for
newspapers and other periodicals, and the solicitation
of freight for railroads and other transportation
agencies. The word “services” extends the exemption
to employees who sell or take orders for a service,
which may be performed for the customer by
someone other than the person taking the order.
üüThe employee must be customarily and regularly
engaged away from the employer’s place or
places of business.
•
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“Customarily and Regularly” means greater than
occasional but less than constant; it includes work
normally done every workweek, but does not include
isolated or one-time tasks.
•
“Away from Employer’s Place of Business” means
an outside sales employee makes sales at the
customer’s place of business, or, if selling doorto-door, at the customer’s home. Outside sales
does not include sales made by mail, telephone
or the Internet unless such contact is used merely
as an adjunct to personal calls. Any fixed site,
whether home or office, used by a salesperson
as a headquarters or for telephonic solicitation of
sales is considered one of the employer’s places of
business, even though the employer is not in any
formal sense the owner or tenant of the property.
The salary requirements of the regulation do not apply
to the outside sales exemption. An employee who
does not satisfy the requirements of the outside sales
exemption may still qualify as an exempt employee
under one of the other exemptions allowed by Section
13(a)(1) of the FLSA and the Part 541 regulations if all the
criteria for the exemption is met.
Promotion work may or may not be exempt outside
sales work, depending upon the circumstances under
which it is performed. Promotional work that is actually
performed incidental to and in conjunction with an
employee’s own outside sales or solicitations is exempt
work. However, promotion work that is incidental to
sales made, or to be made, by someone else is not
exempt outside sales work.
Drivers who deliver products and also sell such
products may qualify as exempt outside sales
employees only if the employee has a primary duty
of making sales. Several factors should be considered
in determining whether a driver has a primary duty of
making sales, including a comparison of the driver’s
duties with those of other employees engaged as
drivers and as salespersons, the presence or absence
of customary or contractual arrangements concerning
amounts of products to be delivered, whether or not
the driver has a selling or solicitor’s license when
required by law, the description of the employee’s
occupation in collective bargaining agreements, and
other factors set forth in the regulation.
✦✦Computer Employee Exemption.
To qualify for the computer employee exemption,
all of the following tests must be met.
üüThe employee must be compensated either on a
salary or fee basis at a rate not less than $455 per
week or, if compensated on an hourly basis, at a
rate not less than $27.63 an hour.
üüThe employee must be employed as a computer
systems analyst, computer programmer,
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software engineer or other similarly skilled
worker in the computer field performing the
duties described below.
üüThe employee’s primary duty must consist of:
»»
The application of systems analysis techniques and
procedures, including consulting with users, to
determine hardware, software or system functional
specifications;
»»
The design, development, documentation, analysis,
creation, testing or modification of computer systems
or programs, including prototypes, based on and
related to user or system design specifications;
»»
The design, documentation, testing, creation or
modification of computer programs related to
machine operating systems; or
»»
A combination of the aforementioned duties, the
performance of which requires the same level of skills.
»»
“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.
The computer employee exemption does not
include employees engaged in the manufacture or
repair of computer hardware and related equipment.
Employees whose work is highly dependent upon,
or facilitated by, the use of computers and computer
software programs (e.g., engineers, drafters and others
skilled in computer-aided design software), but who
are not primarily engaged in computer systems analysis
and programming or other similarly skilled computerrelated occupations, are also not exempt under the
computer employee exemption.
✦✦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 executive, administrative
or professional employee identified in the standard
tests for exemption.
utilizing compensatory time for
salaried staff versus paying overtime
Non-profits are not permitted to utilize compensatory
time for salaried employees instead of paying
overtime. Only public agencies, such as state and local
governments, are permitted to use compensatory time
instead of paying overtime.
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