With new rules on hold, a refresher on white-collar overtime

The U.S. Department of Labor spent the past three years rewriting the rules governing when exempt employees must receive overtime pay.

However, those rules were put on hold by a judge’s temporary injunction in response to lawsuits challenging the DOL’s authority to adjust the Fair Labor Standards Act’s salary threshold. (See the box below for more on where the lawsuits stand.)

With the new rules most likely dead for the foreseeable future, let’s review the overtime rules that remain in effect, as they have been since 2004.

To qualify as exempt from the FLSA overtime rules, employees must generally meet certain tests regarding their job duties and be paid on a salary basis at not less than $455 per week. Here’s a brief description of what qualifies for three main exemptions:

Executive exemption

To qualify for the executive exemption, all of these tests must be met:

Payroll Handbook D
  • The employee must be compensated on a salary basis at a rate not less than $455 per week.
  • The employee’s primary duty must be managing the enterprise or one of its customarily recognized departments or subdivisions.
  • He or she must direct the work of two or more full-time employees.
  • The employee must have the authority to hire or fire other employees, or his or her suggestions and recommendations about changing the employment status of other employees must be given particular weight.

Administrative exemption

In addition to earning no less than $455 per week:

  • The employee’s primary duty must be performing office or nonmanual work directly related to the management or general business operations of the employer or its customers.
  • The employee’s primary duty includes exercising discretion and independent judgment with respect to matters of significance.

Professional exemption

There are two types of exempt professional employees: learned professionals and creative professionals.

In addition to earning no less than $455 per week, a learned professional must perform work that requires advanced knowledge, is predominantly intellectual and requires discretion and judgment.

A creative professional’s primary duties must be performing work requiring invention, imagination, originality or talent in a recognized field of artistic or creative endeavor.

Overtime rules still in limbo

Lawsuits seeking to scrap the Department of Labor’s revised overtime rules are proceeding on parallel tracks. The 5th Circuit Court of Appeals will soon hear an expedited appeal of a preliminary injunction that prevented the rules from taking effect Dec. 1. Briefs are due Jan. 31 in that case.

Meanwhile, the original case trudges on in the U.S. District Court for Eastern Texas, which is considering two motions:

  • A plaintiffs’ motion to kill the rules immediately, without a trial
  • A motion by the Texas AFL-CIO to carry on the lawsuit, should the Trump administration decide—as is likely—not to defend the new rules.