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May 11, 2010
What HR Needs to Know About the Salary, Duties Tests and Exemptions

Whether employees "fit" into a category that entitles them to be exempt from federal and state wage and hour requirements, particularly overtime pay, is of crucial importance, Laura P. Worsinger, Esq., said in a BLR webinar titled "Reducing Overtime Costs: What You Legally Can—and Can't—Do to Keep Workers at Their Straight-Time Rates."

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Who Fits Into Exempt Categories?

The key question is "fit"—that is, who fits into an exempt category and who does not? With the exception of certain high-paid computer professionals and certain sales people, an employee must fall within one of three general categories to qualify as "exempt":

  • Executive exemption (director/manager/supervisor)
  • Administrative exemption (advising management, planning, buying goods)
  • Professional exemption (licensed or certified in a recognized profession or working in a learned or artistic profession)

Employees falling within the above categories must also meet two basic tests: the duties test and the salary test.

The Salary Test

The salary test is fairly simple. To be exempt in California, a full-time employee must be salaried and earn at least two times minimum wage (i.e., at least $640 per week or $33,280 annually, as of January 1, 2008).

Under federal law, the thresholds are $455 per week, $1,972 per month, and $23,660 per year.

Cautionary note: A "mis-fit and misclassification" can result in employer liability for thousands of dollars in back wages for unpaid overtime--specifically, one and one-half times an employee's hourly wage for every hour worked in excess of 40 hours in one week. Worsinger said employees are seeking (and winning) millions of dollars in back wages and penalties for having been misclassified as "exempt" managers or as independent contractors.

The Duties Test

The duties test is not as simple, but Worsinger said employers must focus on what employees actually do. Here are two tips to keep in mind when applying the duties test:

  1. Giving an employee an impressive title and/or paying a generous salary might not by itself "cut it."
  2. Both quantity and quality apply. An employee might be in "sole charge" of a department but still must meet the duties test in order to qualify as an exempt manager.

Employers also need to be aware of relevant state laws. In California, for example, regardless of compensation received, in order to "fit" into an exempt category, an employee must spend at least 50 percent of his or her time performing what are considered "exempt" duties.

Laura P. Worsinger, Esq. is Of Counsel with the Los Angeles office of Dykema Gossett PLLC. She has broad counseling and litigation experience and specializes in the defense of employers in individual and class actions involving wage and hour violations, misclassification, discrimination, wrongful termination, and other employment-related proceedings. She can be contacted at

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