Understanding Overtime Exemptions Under the FLSA

[Editor's note: On Nov. 15, 2024, the U.S. District Court for the Eastern District of Texas vacated the Biden administration’s overtime rule, which had raised the salary threshold for white-collar exemptions to overtime requirements. The ruling applies nationwide and returns the exempt salary threshold to $35,568 per year.]

Overview

The Fair Labor Standards Act (FLSA) is a federal law with broad coverage, affecting most private and public employees. The FLSA generally requires employers to pay all covered nonexempt employees the statutory minimum wage and overtime pay of at least one and one-half times their regular rates of pay for hours worked in excess of 40 hours in a workweek.  

There are some exceptions to the 40-hour-per-week standard for employees of hospitals and nursing homes and for police officers and firefighters employed by public agencies.

This toolkit provides an overview of the positions that may qualify for an exemption from overtime pay under the FLSA white-collar and industry exemptions. See What You Need to Know About White-Collar Overtime Exemptions Under the FLSA.

FLSA Coverage

Under the FLSA, the term "employ" means to "suffer or permit to work," however, some individuals may not fall within that definition. For example, trainees, interns, externs, apprentices and graduate assistants may not be considered employees within the meaning of the FLSA.

Individuals also may not be covered by the FLSA when they volunteer time to religious, charitable, civic, humanitarian or similar nonprofit organizations as a public service and do not expect or receive compensation. See DOL FLSA Advisor: Volunteers.

The FLSA also does not apply to work performed by independent contractors.

If an employment relationship exists, the FLSA applies when either the individual or enterprise coverage rules are met. An employee is covered by the FLSA on an individual basis if he or she is "engaged in commerce or the production of goods for commerce." 29 U.S.C. Section 206(a). The rules for enterprise coverage focus on the nature of the employer's business. See DOL Fact Sheet #14: Coverage Under the Fair Labor Standards Act.

Unless an employer can establish that it is not covered by the FLSA or that an exemption from the FLSA applies, employees are presumed to be eligible for overtime. Employers and employees cannot agree to waive coverage of the FLSA. Similarly, in most circumstances, collective bargaining agreements cannot waive coverage of the FLSA.

Overtime Exemptions Under the FLSA

The FLSA Section 13(a)(1) exemptions are often referred to as the white-collar exemptions. To be exempt from overtime, a position must meet the following three criteria:

1. A minimum salary threshold (some exceptions apply).
2. Payment on a salary basis as defined by the regulations (some exceptions apply).
3. A primary duty test that is specific to each exemption.

Minimum salary

Workers who do not earn at least $35,568 ($684 a week) must be paid overtime, even if they’re classified as a manager or professional.

Nondiscretionary bonuses and incentive payments (including commissions) paid on an annual or more frequent basis may be used to satisfy up to 10 percent of the standard salary level.

Salary basis

An exempt employee must be paid a predetermined and fixed salary that meets the minimum salary requirements in the regulations and that is not subject to reduction because of variations in the quality or quantity of work performed. See Fact Sheet #17G: Salary Basis Requirement and the Part 541 Exemptions Under the Fair Labor Standards Act (FLSA)

White-collar exemptions

In addition to the minimum salary and salary basis requirement, a position must meet certain duties tests specific to each exemption:

Executive exemption

• ​The primary duty must be managing the enterprise or managing a customarily recognized department or subdivision of the enterprise.
• The position must customarily and regularly direct the work of at least two or more other full-time employees or their equivalent.
• The position 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.

Administrative exemption

• ​The primary duty must be the performance of office or nonmanual work directly related to the management or general business operations of the employer or the employer's customers.
• The primary duty includes the exercise of discretion and independent judgment with respect to matters of significance.

Professional exemption

​Learned professional (examples include accountant, attorney, nurse and engineer):

• The primary duty must be the performance of work requiring advanced knowledge, defined as work that is predominantly intellectual in character and requires the consistent exercise of discretion and judgment.
• The advanced knowledge must be in a field of science or learning.
• The advanced knowledge must be customarily acquired by a prolonged course of specialized intellectual instruction.

Creative professional (examples include composer, singer and graphic designer):

• The primary duty must be the performance of work requiring invention, imagination, originality or talent in a recognized field of artistic or creative endeavor as opposed to routine mental, manual or physical work.

Teachers, doctors and artists may also qualify for the professional employee exemption. The salary basis requirements do not apply to teachers, licensed/certified practitioners of law and medicine, medical interns and residents.

Computer-related occupation exemption

• ​The primary duty must consist of higher-level system-analyst techniques and procedures, higher-level design or testing of systems, higher-level design or testing for operating systems, or some combination of the three. This exemption is meant for positions such as network analyst, developer and software engineer; it is specifically not meant for lower-level computer support roles.
• The position must be compensated on a salary basis of not less than the minimum salary requirement or at least $27.63 per hour. 

Highly compensated employee exemption

• To be eligible for the highly compensated employee exemption, the employee must be paid a total annual compensation of at least $107,432, paid on a salary basis.
• The position customarily and regularly performs any one or more of the exempt duties of an executive, administrative or professional employee.

​Outside sales exemption

• ​The salesperson is customarily and regularly engaged away from the employer's place or places of business and performing the primary duty of making sales or obtaining orders for contracts for services or for the use of facilities for which consideration is paid by a client or customers.
• The minimum salary and salary basis requirements do not apply to exempt outside sales employees. 

Combination exemption. When an employee performs a combination of exempt duties that fall under the executive, administrative, professional, outside sales and computer employee exemptions, he or she may qualify under a combination exemption.

When an employee performs a combination of duties that fall under both exempt and nonexempt work, the employee's primary duty will determine whether an overtime exemption applies. The employee's primary duty must be the performance of exempt work in order for the minimum wage and overtime white-collar exemptions to apply. See DOL Opinion Letter FLSA 2005-14.

Industry exemptions

The FLSA also provides overtime exemptions that apply by industry. Summaries of the more commonly used industry exemptions include the following:

Agricultural activities or operations. The FLSA exempts from minimum wage and overtime pay requirements certain employees who are employed in agriculture or in certain related activities or in certain operations with respect to agricultural or horticultural commodities. 

Positions Not Eligible for Exemption

There are certain types of positions that the DOL considers to be outside the scope of any exemption and, therefore, eligible for overtime.

Blue-collar workers

Manual laborers or other blue-collar workers "who perform work involving repetitive operations with their hands, physical skill and energy" are entitled to overtime. Examples of such blue-collar workers include "non-management production-line employees and non-management employees in maintenance, construction and similar occupations such as carpenters, electricians, mechanics, plumbers, iron workers, craftsmen, operation engineers, longshoremen, and construction workers."

First responders

The white-collar exemptions also do not apply to certain first responders, such as police officers, fire fighters, paramedics, emergency medical technicians, ambulance personnel and rescue workers, "regardless of rank or pay level, who perform work such as preventing, controlling or extinguishing fires of any type; rescuing fire, crime or accident victims; preventing or detecting crimes; conducting investigations or inspections for violations of law; performing surveillance; pursuing, restraining and apprehending suspects; detaining or supervising suspected and convicted criminals, including those on probation or parole; interviewing witnesses; interrogating and fingerprinting suspects; preparing investigative reports; or other similar work."

Other workers

Inside sales employees are entitled to overtime under the FLSA regulations. The DOL expressly states in the preamble to the regulations that it "does not have statutory authority to exempt inside sales employees from the FLSA minimum wage and overtime requirements under the outside sales exemption."
Generally, paralegals and legal assistants are entitled to overtime. For a discussion of a particular paralegal position the DOL concluded was entitled to overtime, see DOL Opinion Letter FLSA 2005-54.
Many executive and administrative assistants are entitled to overtime. For a discussion of several administrative assistant positions in state employment in which the DOL concluded some were and some were not entitled to overtime, see DOL Opinion Letter FLSA 2006-23NA.

For additional guidance see DOL Wage and Hour Division Final Rulings and Opinion Letters.

State Overtime Laws

A few states, such as California and New York, have overtime exemption criteria that conflict with the FLSA. Multistate employers should check applicable state laws to ensure compliance with both federal and state law. See Multistate Law Comparison Tool.

Additional Resources

FLSA Overtime Rule Resources

FLSA Exemption Flow Chart

FLSA Exempt/Nonexempt Questionnaire

Are there exceptions to the minimum salary requirements for white-collar exemptions under the FLSA regulations?

When can deductions be made from exempt employees' salary?

May an employer require an exempt employee to record hours and work a specified schedule?

What is meant by the terms "exempt," "non-exempt," "salaried" and "hourly"?

Can I pay exempt employees extra without jeopardizing their exempt status?