If an employer is not covered by the FLSA, its employees
may be individually covered if they engage in:
• Interstate commerce;
• The production of goods for interstate commerce;or
• Activities closely related or directly essential to the
production of goods for interstate commerce.
Interstate commerce includes activities such as working
in communications or transportation, sending or receiving mail through
the U.S. postal system, using telephones for interstate communication,
keeping records of interstate transactions, and making credit card
transactions that use the interstate banking system.
An employee is generally covered by FLSA's minimum wage
requirements unless the employee qualifies for one of FLSA's exemptions.
Employees that do not qualify for an exemption are "nonexempt" employees.
An employee who is paid on an hourly basis is usually considered to
be nonexempt, regardless of the hourly rate paid. Employees generally
classified as nonexempt include clerical, blue-collar, maintenance,
construction, and semiskilled workers, as well as technicians and
The FLSA exempts several “white-collar” jobs from minimum
Please see the
national Exempt Personnel
In addition, the FLSA provides for a number of miscellaneous
exemptions from its minimum wage requirements. These include:
• Employees of certain seasonal amusement or recreational
• Employees in fishing operations and in initial processing
• Agricultural workers employed by employers using fewer
than 500 man-days in any quarter of the previous year
• Agricultural workers who are members of the employer's
• Locally based hand harvest workers traditionally paid
a piece rate who worked fewer than 13 weeks in agriculture during
the preceding calendar year
• Certain local seasonal harvesters under the age of 17
• Employees who principally work in the range production
• Seafarers on foreign vessels
• Newspaper carriers who deliver to consumers
• Persons employed outside of the United States for the
• Employees of gas stations with annual sales of less than
2016, the federal Department of Labor (DOL) released final changes
to the overtime regulations. With this final rule, the DOL sought
to update the salary level required for exemption to ensure that FLSA’s
intended overtime protections would be fully implemented and to simplify
the identification of nonexempt employees, thus making the executive,
administrative, and professional employee exemption easier for employers
and workers to understand and apply. These changes were to be effective
on December 1, 2016. But, just a week before the December 1, 2016,
effective date, the U.S. District Court for the Eastern District of
Texas granted an emergency motion enjoining the DOL from enforcing
the new overtime rule on a nationwide basis. This means that until
further action from the courts, Congress, or the new administration,
the minimum salary threshold for the white-collar exemptions will
remain where it has been since 2004, at $455 a week. The salary threshold
for the highly compensated employee (HCE) exemption will remain at
$100,000 per year.
that made plans to reclassify employees as nonexempt rather than raise
their salaries to the $913–per-week level that was included in the
new rule, these employees may continue to be treated as exempt (for
now), as long as they otherwise qualify for exemption. Employers that
took steps to raise the salaries of exempt employees will have to
carefully consider their next steps, as taking back salary increases
will likely create an employee relations problem, and as of right
now, the decision on the rule is temporary.
is a summary of the regulations on hold for now:
Salary level. The most prominent change
would be the increase in the salary level required for exemption from
overtime to an annual salary of $47,476. This translates to a weekly
salary of $913. This means that your employees who currently earn
more than $455 per week ($23,660 annually), but less than $913 per
week, would need to be reclassified as nonexempt, if the regulations
eventually become effective, and would be entitled to overtime for
any hours worked over 40 in a week. The DOL seeks to increase the
salary level for employees in American Samoa to $767 per week. In
addition, the base rate for employees in the motion picture industry
would increase to $1,397 per week.
Automatic adjustments every 3 years. The DOL seeks to automatically update the standard salary and compensation
levels every 3 years going forward. The DOL aims to set the salary
level at the 40th percentile of full-time salaried workers in the
lowest income region in the country, which is currently the South.
Salary level for executive, administrative, and
professional employees. In order to be exempt from overtime,
executive, administrative, and professional employees would have to
be compensated on a salary basis of at least $913 per week, exclusive
of board, lodging or other facilities, and meet the duties tests.
Computer professionals. The overtime
exemption would apply to any computer employee who is compensated
on a salary or fee basis at a rate of $913 per week or more, or on
an hourly basis at a rate of at least $27.63 an hour, and meets the
HCEs. The DOL aims to set the total
annual compensation level for HCEs at $134,004 per year, up from the
current threshold of $100,000. This compensation level is equal to
the 90th percentile of earnings of full-time salaried workers nationally.
According to the DOL, to be exempt as an HCE, an employee would also
have to receive at least a standard salary amount of $913 per week
on a salary or fee basis and pass a minimal duties test. An HCE must
customarily and regularly perform any one or more of the exempt duties
or responsibilities of an executive, administrative, or professional
employee and have the primary duty of performing office or nonmanual
Duties tests remain the same. The DOL
did not alter the duties tests for exemption. Therefore, employers
would follow the duties tests that they have been familiar with since
Counting bonuses and incentive payments toward
the salary level. If the new regulations eventually go
through, employers would be able to count nondiscretionary bonuses,
incentive payments, and commissions toward as much as 10 percent of
the salary threshold. In order to count, these payments would have
to be paid on a quarterly or more frequent basis. The new rules would
also permit the employer to make a catch-up payment. An HCE’s annual
compensation would continue to include commissions, nondiscretionary
bonuses, and other nondiscretionary compensation earned, as it has
in the past. An HCE would also have to receive at least the new standard
salary amount of $913 per week on a salary or fee basis.
Fee basis. Under DOL’s final regulations,
administrative and professional employees would still be able to be
paid on a fee basis rather than on a salary basis. To determine whether
the fee payment met the minimum amount of salary required for exemption,
the amount paid to the employee would be tested by determining the
time worked on the job and whether the fee payment is at a rate that
would amount to $913 per week if the employee worked 40 hours. For
example, an artist paid $500 for a picture that took 20 hours to complete
would meet the minimum salary requirement for exemption, since earnings
at this rate would yield the artist $1,000 if 40 hours were worked.
Educational establishments. Under DOL’s
final regulations on hold for now, employees whose primary duty is
performing administrative functions directly related to academic instruction
or training in an educational establishment or department would be
exempt if they were compensated on a salary or fee basis of at least
$913 per week (or $767 per week, if employed in American Samoa by
employers other than the federal government), exclusive of board,
lodging, or other facilities, or on a salary basis that is at least
equal to the entrance salary for teachers in the educational establishment
in which they are employed.
Computing compensation. An exempt employee’s
earnings may be computed on an hourly, daily, or shift basis, without
losing the exemption or violating the salary basis requirement, if
the employment arrangement also includes a guarantee of at least the
minimum weekly required amount paid on a salary basis, regardless
of the number of hours, days, or shifts worked, and a reasonable relationship
exists between the guaranteed amount and the amount actually earned.
The reasonable relationship test would be met if the weekly guarantee
was roughly equivalent to the employee’s usual earnings at the assigned
hourly, daily, or shift rate for the employee’s normal scheduled workweek.
Under DOL’s final regulations, for example, where the weekly salary
level required for exemption would be $913, an exempt employee guaranteed
compensation of at least $1,000 for any week in which the employee
performs any work, and who normally works four shifts each week, could
be paid $300 per shift without violating the salary basis requirement.
The reasonable relationship requirement applies only if the employee’s
pay is computed on an hourly, daily, or shift basis. It does not apply,
for example, to an exempt store manager paid a guaranteed salary per
week that exceeds the current salary level who also receives a commission
of one-half percent of all sales in the store or 5 percent of the
store’s profits, which in some weeks may total as much as, or even
more than, the guaranteed salary.
The DOL prohibits third-party employers, such as homecare
agencies, from claiming the companionship or live-in worker exemptions.
The DOL has revised the definition of “companionship services” to
clarify and narrow the duties that fall within the term. As a result,
many more domestic service workers are protected by FLSA’s minimum
wage and overtime provisions.
According to the DOL:
• The tasks that comprise exempt companionship services
are more narrowly defined than in the past.
• The exemptions for companionship services and live-in
domestic service employees can be claimed only by the individual,
family, or household using the services, rather than by third-party
employers such as home healthcare agencies.
• The recordkeeping requirements for employers of live-in
domestic service employees are revised.
The DOL states that there are no changes to regulations
• What constitutes a private home (the type of residence
in which domestic service occurs);
• Whether an employment relationship exists;
• Whether an employee is jointly employed by two or more
• What constitutes compensable hours worked.
Companionship services. The term “companionship services” means the provision of fellowship
and protection for an elderly person or person with an illness, injury,
or disability who requires assistance in caring for himself or herself.
Companionship services also includes the provision of “care” if the
care is provided attendant to and in conjunction with the provision
of fellowship and protection, and if it does not exceed 20 percent
of the total hours worked per person each workweek. “Fellowship” means
to engage the person in social, physical, and mental activities. “Protection”
means to be present with the person in his or her home or to accompany
the person when outside of the home to monitor the person’s safety
and well-being. Examples of fellowship and protection may include
conversation; reading; games; crafts; accompanying the person on walks;
and going on errands, to appointments, or to social events with the
person. By changing the definition of “companionship services,” the
DOL has decreased the number of companions who would qualify for the
minimum wage and overtime exemptions under the FLSA.
Live-in domestic service employees. Live-in domestic
service workers who reside in the employer’s home permanently or for
an extended period of time and are employed by an individual, family,
or household are exempt from overtime pay, although they must be paid
at least the federal minimum wage for all hours worked. Live-in domestic
service workers who are solely or jointly employed by a third party
must be paid at least the federal minimum wage and overtime pay for
all hours worked by that third-party employer. These employers must
maintain an accurate record of hours worked by live-in domestic service
workers. The employer may require the live-in domestic service employee
to record his or her hours worked and to submit the record to the
Credit for lodging. The FLSA allows an employer to count the value of food, housing,
or other facilities provided to employees toward wages under certain
circumstances. An employer that wishes to claim the credit for lodging
must ensure that the following five requirements are met:
1. Lodging must be regularly provided by the employer or
2. The employee must voluntarily accept the lodging.
3. The lodging must be furnished in compliance with applicable
federal, state, or local laws.
4. The lodging must primarily benefit the employee rather
than the employer.
5. The employer must maintain accurate records of the costs
incurred in the furnishing of the lodging.