I once tried to count all of the miscellaneous exemptions
contained in the FLSA. I lost count somewhere around 65, as it
depends on whether subparts of the U.S. Code count as more than
one. Some of these exemptions apply to minimum wage and overtime
and others just to overtime, but there are a few more than just the
"white-collar" exemptions. Everybody likes to think of
just executive, administrative, professional, computer-related, and
outside sales as the only ones.
For example, minimum wage and overtime do not apply to any employee
engaged in the delivery of newspapers to the consumer. And they
also don't apply to any homeworker engaged in the making of
wreaths composed principally of natural holly, pine, cedar, or
other evergreens. Who would have known? Overtime also doesn't
apply to any driver employed by an employer engaged in the business
of operating taxicabs. Maybe Lyft and Uber should call themselves
taxicab companies.
But the often-overlooked exemption I want to talk about here is the
"highly compensated" exemption. As salaries have
increased, especially in urban markets, it will be easier to fit
office workers into this exemption.
A little bit of background on the so-called "HCE." In
2004, the Department of Labor overhauled the white-collar
exemptions and published new regulations. This was the first big
overhaul since 1990, when the computer-related exemption was added
and the first time the minimum salary requirement had been
increased since 1975. Along with these new regulations, the DOL
added the HCE. It was originally going to be set with a minimum
highly compensated threshold of around $65,000 annually, but even
back then that meant that administrative assistants and legal
secretaries in New York City and Washington, D.C. may then become
exempt because of the salaries in those markets. So, the DOL put
the minimum annual compensation at $100,000. In 2020, this was
increased to $107,432 annually—not sure why the DOL
couldn't have just picked $107,500 instead. Or $108,000. Or
$107,000. No, it is down to the penny.
So, what makes someone exempt as an HCE?
First, the employee has to be paid on a salary basis. The weekly
salary has to be at least $684 per week under the current minimum
threshold.
Next, the employee's primary duty must include performing
office work and/or non-manual work. In other words, the work has to
be of the "white-collar" variety as opposed to the
"blue-collar" manual labor.
Then, the employee must "customarily and regularly"
perform at least one of the exempt duties of an executive,
administrative, or professional employee. You don't have to do
all of the duties in the tests, just one. You can't rely on the
HCE if the exempt duty is only done once in a while. But the one
exempt duty need not be the HCE's primary duty. The HCE just
has to do it every week.
Finally, remember that the $107,432 is an amount based upon total
annual compensation, not weekly salary alone. This total
compensation can include commissions, bonuses, and other cash
compensation earned during the year. But you can't add the
value of health insurance and call that part of the total
compensation.
Some examples could include paralegals, physician assistants,
coordinators, managers, accounting staff, and junior engineers,
just to name a few.
The DOL is talking about rolling out some revisions to the
white-collar exemptions before the end of the current
administration in the White House, so we may see some proposed
changes to the HCE. But, if as an employer you have employees
earning overtime and making more than $107,432, it may be worth a
look.
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