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Exempt v. Nonexempt FLSA Current Salary Thresholds and Duties

On Behalf of | Jul 12, 2022 | Business And Corporate Law

Federal law gives rights to employees regarding pay. These rights come from the Fair Labor Standards Act (FLSA). These rights extend to government and private employees, but they do not extend to everyone. Employees who do not have wage rights under the FLSA are “exempt” employees. If you have concerns about employee wage rights under federal law, our experienced and respected lawyers at Batson Nolan PLC can help you make sure wages are properly paid at your workplace.

FLSA Rights for Nonexempt Employees

Under the FLSA, nonexempt employees must receive:

  • Minimum wage and
  • Overtime pay.

A failure to properly pay minimum wage or overtime can give an employee the right to sue their employer, and it can subject an employer to stiff penalties.

Minimum Wage

Currently, the FLSA minimum wage laws state that every nonexempt employee must make at least $7.25 per hour. The federal minimum wage can change, so it is important for both employers and employees to stay up to date on their rights and obligations.

Overtime Pay

Not only must nonexempt employees receive a minimum wage for their labor, but they must also receive premium payment for hours worked in excess of a standard workweek. Under the FLSA, a standard workweek is 40 hours of work within seven consecutive days. Overtime is defined as any working time in excess of these 40 hours, and these excess hours must be compensated with overtime pay. For overtime work, employees must receive 1.5 times their regular pay rate.

Who Is Exempt from the Federal Wage Laws?

When determining who is federally exempt v. nonexempt, the FLSA current salary thresholds and duties tests are where you need to look. There are two exemption tests. There is a test for employees who meet the standard salary threshold and a test for “highly compensated employees.”

The Standard Salary Threshold Test

Under the standard salary threshold test, employees are normally exempt if they make at least $684 per week (or $35,568 per year) and have one of the following types of positions:

  • Executive,
  • Administrative,
  • Learned professional,
  • Creative professional,
  • Computer, or
  • Outside sales (this one is a little different).

For an exemption to apply, federal law is more concerned with the duties associated with a job, not the job title. Below, let’s review how the law defines each of these exempt jobs.

Executive jobs

Executive jobs involve:

  • A salary that amounts to at least $684 per week;
  • The primary duty of managing a whole business or a recognized subdivision of a business;
  • The customary and regular duty of directing at least two full-time employees (or their equivalent); and
  • The authority to hire or fire employees, or give input regarding hiring, firing, advancement, or employment status changes.

To avoid confusion and potential problems regarding wage payment rights, executive job expectations should be clear to everyone.

Administrative jobs

An exempt administrative employee must have primary job features and duties that include:

  • Payment by fee or salary that amounts to at least $684 per week;
  • Office or non-manual work directly related to management or general business operations of the employer or the employer’s customers; and
  • The exercise of discretion and independent judgment regarding significant matters.

If a business downsizes, the employer and employees alike should pay close attention to how they consolidate job duties and how that might affect pay rights moving forward.

Learned professional jobs

An employee is a learned professional if they:

  • Receive payment by fee or salary that amounts to at least $684 per week;
  • Have the primary duty of performing work that requires advanced, predominantly intellectual knowledge and consistent exercise of judgment and discretion;
  • Have the duty of performing work that requires advanced knowledge in learning or science; and
  • Have the duty of performing work that requires advanced knowledge customarily acquired through prolonged and specialized education.

Looking at whether an employee must have professional licensing for their job can help when determining exempt status. However, not all learned professionals need to be licensed, and not all licensed employees are exempt.

Creative professional jobs

An individual is a creative professional employee if their job primarily requires inventiveness, imagination, originality, or talent in a recognized creative field. Creative professionals must also receive payment by fee or salary that amounts to at least $684 per week. There can be many gray areas regarding this exemption, so speaking to an experienced lawyer about who qualifies is important.

Computer jobs

Under FLSA’s exemption test, computer employees work as computer systems analysts, as computer programmers, as software engineers, or in positions that require similar skills. They must receive payment by fee or salary that amounts to at least $684 per week or $27.63 per hour. A computer employee’s duties include:

  • Applying systems analysis techniques and procedures that include user consulting to determine software, hardware, or system function specifications or
  • Designing, developing, documenting, analyzing, creating, testing, or modifying computer systems or programs;

An individual is also a computer employee if they are responsible for performing some combination of the tasks mentioned above while using the same level of skill.

Outside sales jobs

Outside sales employees are exempt if:

  • Their primary job duty is to make sales, obtain orders, or procure contracts between the employer and the employer’s customers and
  • Their work is primarily and customarily performed outside of their employer’s place of business.

Outside sales jobs do not have to meet a specific salary threshold to qualify for exemption.

The Highly Compensated Employee Test

The FLSA allows overtime and minimum wage exemptions for a highly compensated employee if they meet the following criteria:

  • They receive total annual compensation of at least $107,432 and
  • They regularly and customarily perform at least one of the duties associated with the exempt executive, administrative, or professional jobs identified above.

To reach the threshold of $107,432, the exempt highly compensated employee must be paid at least $684 per week on a salary or fee basis.

Calculating Wages

There are multiple ways to calculate an employee’s wages to determine whether they are exempt. When calculating wages for an exemption, the FLSA allows nondiscretionary bonuses and incentive pay to account for 10% of an employee’s wages.

Increased Obligations

Employers must comply with the federal minimums, but they must also comply with any increased pay and overtime obligations mandated by:

  • Employment contracts,
  • Collective bargaining agreements,
  • State law, and
  • Local law.

If you are unsure whether an employer has obligations beyond the federal pay rules, speak to a skilled attorney.

We Protect and Recover

At Batson Nolan PLC, our attorneys are top-rated and ready to help employees and employers protect themselves in the workplace. We can recover what you are owed and protect your rights. We have deep roots and a wealth of experience as our Tennessee firm has been in practice for over 150 years. We can expertly answer your call for help or you can contact us online.