Passing the ‘duties test’: new exemption definitions — Business Management Daily: Free Reports on Human Resources, Employment Law, Office Management, Office Communication, Office Technology and Small Business Tax Business Management Daily
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Passing the ‘duties test’: new exemption definitions

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in Leaders & Managers,Management Training

Under the new overtime rules, white-collar employees who earn less than $455 per week ($23,660 annually) are automatically eligible for overtime. Those who earn more than $100,000 and perform just one of the exempt duties explained below will not be eligible for overtime. For employees who earn between those two numbers ($23,660 and $100,000), you must analyze their duties to see if they'd fall into one of these five exemption categories below:

1. Executive exemption. To be considered exempt executives, employees' primary duties must be managing a business or department. They also must regularly direct at least two full-time employees and have authority to hire and fire (or their hire/fire recommendations must carry "particular weight").

2. Administrative exemption. Administrative employees are exempt from overtime pay if their primary duty is performing office or nonmanual work that's related to the employer's management or operations. Plus, their duties must involve "the exercise of discretion and independent judgment with respect to matters of significance."

That final phrase also appears in the old regulations and has caused much confusion (and numerous lawsuits) over the years. Labor tried to clarify the phrase in its final regulations by listing several factors derived from court cases that illustrate what counts as "discretion and independent judgment."

3. Professional exemption. To qualify for the "learned professional" exemption, an employee's primary duty must be performing nonmanual work requiring advanced knowledge in a field of science or learning, defined as work that is "predominantly intellectual in character" and requires discretion and judgment. To qualify for the "creative professional" exemption, employees' work must require "invention, imagination, originality or talent in a recognized field of artistic or creative endeavor."

4. Outside sales exemption. The employee's primary duty must be making sales or obtaining orders or contracts. Plus, the employee must customarily work away from the main workplace. The new rules do away with the confusing 20 percent test, which forced employers to compare the work of outside salespeople to in-house employees.

5. Computer employee exemption. This exemption category is for computer programmers, software engineers and similar jobs, not customer service reps who happen to use a computer. Also, to qualify, such employees must be paid at least $23,660 a year in salary or, if paid hourly, not less than $27.63 an hour.

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