Overtime Exemptions Generally
- The overtime premium requirement under the FLSA generally applies to all employees unless they fall within a particular exemption or exception under the law.
- As such, employees entitled to overtime premiums are typically referred to as “nonexempt” employees, while employees not entitled to overtime premiums are typically referred to as “exempt” employees.
The “White Collar” Exemption (Executive, Administrative, Professional, or Highly Compensated Employees)
- “White collar” employees who meet certain criteria are exempt from the overtime premium requirement. To qualify as an exempt “white collar” employee, an employee must satisfy three requirements:
- (1) The employee must be paid on a salary basis. This requires that for any workweek in which the employee performs any work, the employee must be paid a predetermined and fixed amount, regardless of variations in the quality or quantity of the work (including the number of days or hours worked each workweek). The employee must also be paid a predetermined and fixed amount when no work is available, but the employee is ready, willing, and able to work.
- To be paid on a salary basis, an employee’s salary does not need to represent all compensation received by the employee, but there must be some amount of pay the employee will receive in any workweek in which the employee performs work (subject to the exceptions provided below).
- Even if an employee’s pay is expressed in hourly terms (which is fairly common among many payroll programs), the employee is still paid on a salary basis if the employee is paid a fixed amount for any week in which the employee performs any work, regardless of variations in the quality or quantity of the work.
- Administrative, Professional, and Highly Compensated Employees can be paid on a fee basis, instead of on a salary basis, to satisfy the first requirement of the “white collar” exemption. Payment on a fee basis requires the payment of a predetermined and fixed amount for a single job, regardless of the time required for its completion.
- Fee basis payments are only valid for the types of jobs that are unique in nature, rather than a series of jobs repeated indefinitely for which payment is made on an identical basis (as is the case for piece-rate payments).
- When an employee is paid on a salary basis, the employee’s pay should generally not be docked when the employee works only a partial workweek, regardless of how short or long. Impermissible pay docking is inconsistent with paying an employee on a salary basis, thereby potentially defeating the exemption. However, an employee’s pay may be docked for a partial workweek, without losing the exemption, if any of the following circumstances apply:
- (i) The employee is absent for one or more full days (not partial days) for personal reasons other than sickness or disability;
- Partial days worked typically cannot be docked, even if part of the day is not worked for personal reasons. Only full days may be docked for personal reasons. However, if an employer has a paid leave policy that covers time off for personal reasons (such as a general PTO allowance), the employer may deduct leave for partial days worked if doing so will not result in a reduction of pay.
- (ii) The employee is absent for one or more full days (not partial days) due to sickness or disability, and the employer has a paid leave plan that compensates employees for salary lost due to sickness or disability (such as paid sick leave or short-term disability), even if the employee is not yet eligible for the plan or already exhausted his or her paid leave under the plan;
- Like absences for personal reasons, while partial days worked due to sickness or disability typically cannot be docked, if an employer has a paid leave plan that covers time off for sickness or disability, the employer may deduct time off for partial days worked if doing so will not result in a reduction of pay. Unlike full day docking due to sickness or disability, however, when an employee exhausts or is not yet eligible for paid leave under the plan, partial day docking is not permitted.
- (iii) The employee is absent because of an unpaid disciplinary suspension of one or more full days for violating a written workplace conduct rule;
- To qualify for this exception, the written workplace conduct rule at issue must be applicable to all employees.
- A workplace conduct rule, as the name implies, may only relate to an employee’s conduct. Accordingly, while conduct such as sexual harassment or workplace violence may qualify, matters unrelated to conduct, such as absences or insufficient work quality, do not.
- (iv) The employee is taking unpaid leave pursuant to the FMLA;
- This exception applies to leave taken for both full and partial days, as long as the leave is unpaid and taken under the FMLA.
- (v) The employee is subject to a good faith penalty for violating safety rules of major significance;
- Safety rules of major significance include those relating to the prevention of serious danger in the workplace or to other employees.
- For example, a rule prohibiting smoking in explosive plants, oil refineries, and coal mines likely qualifies as a safety rule of major significance.
- (vi) The deduction is made to offset military pay, witness fees, or jury service fees received by the employee;
- Although deductions to offset these amounts earned by an employee are permitted, an employer cannot take deductions for partial week absences due to military, witness, or jury obligations. Doing so will defeat the exemption.
- (vii) The employee works less than a full workweek during the first or last workweek of the employee’s employment; or
- (viii) For public sector employers only, docking pay is also permitted when the employee is paid under a system that allows the accrual of personal leave and sick leave, and which requires pay to be reduced for absences for personal reasons or illness or injury of less than one workday, when accrued leave is not otherwise used because it has been exhausted, it was denied, the employee did not seek permission, or the employee chose to use leave without pay.
- Note that the law does not require an employer to pay an exempt employee when the employee performs no work in a workweek, regardless of the reason. The limitation on docking pay, and the exceptions to the rule, only apply when an exempt employee works part of a workweek.
- (2) The employee must satisfy the salary level test by earning at least $684 per week (equivalent to $35,568 per year).
- Nondiscretionary bonuses, incentive payments, and commissions may be used to satisfy up to 10% of the salary level test requirement, as long as they are paid at least annually.
- If an employee does not earn enough in nondiscretionary bonuses, incentive payments, and commissions in a year to retain his or her exempt status, an employer may make a “catch-up” payment, within one pay period after the end of the year, of up to 10% of the salary level test requirement.
- To determine whether the salary level test is satisfied when issuing payments on a fee basis, the amount of time worked to complete the job should be compared to how much money the employee would earn if the employee worked a typical full-time week of 40 hours.
- For example, if an artist is paid $400 to paint a portrait, and it took the artist 20 hours to complete the job, payment to the artist would satisfy the salary level test, as the artist would earn $800 in 40 hours of work (which is greater than the $684 per week requirement).
- (3) The employee must satisfy the duties test, which varies depending on whether the employee is an Executive, Administrative, or Professional Employee.
- To qualify as an Executive Employee, the employee must satisfy the following:
- (i) The employee’s primary duty must be managing the enterprise or a customarily recognized department or subdivision of the enterprise;
- “Primary duty” is the principal, main, or most important duty that the employee performs.
- “Managing” typically includes, but is not limited to, the following activities:
- Interviewing, selecting, and training employees;
- Directing employees’ work;
- Setting and adjusting employees’ pay rates and hours of work;
- Appraising and reviewing employees for purposes of recommending promotions, demotions, and other job changes;
- Handling employee complaints and grievances;
- Disciplining employees;
- Apportioning work among employees;
- Determining the techniques to be used;
- Controlling the budget;
- Overseeing the flow of materials, merchandise, and supplies; and
- Handling legal compliance measures.
- (ii) The employee must customarily and regularly direct the work of at least two or more full-time employees (or their equivalent, such as one full-time and two half-time employees); and
- “Customarily and regularly” does not mean constant, but it does mean greater than occasional. Tasks normally performed every workweek typically qualify as tasks performed “customarily and regularly.”
- (iii) The employee must have the authority to hire or fire other employees, or the employee’s suggestions and recommendations as to the hiring, firing, advancement, promotion, or any other change of status of other employees must be given particular weight.
- In determining whether an employee’s suggestions and recommendations are given particular weight, courts often look to whether an employee’s job duties include making such suggestions and recommendations, as well as how often such suggestions and recommendations are made, requested, or relied upon.
- Notwithstanding these requirements, employees who own at least a 20% equity interest in the business, and who actively manage the business, are automatically considered exempt as Executive Employees. The salary basis and salary level requirements do not apply.
- The duties test assesses whether an employee’s duties—not title—support the exemption. As such, the exempt classification of employees with managerial titles (such as “assistant manager”) is a common source of litigation when such employees are alleged to not perform all of the duties listed above (or when such duties are not their primary or customary and regular duties).
- To qualify as an Administrative Employee, the employee must satisfy the following:
- (i) The employee’s primary duty must be the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers; and
- “Primary duty” is the principal, main, or most important duty that the employee performs.
- To satisfy the “directly related to the management or general business operations” requirement, an employee must perform work that directly assists with running or servicing the business or its customers, including, but not limited to, work in functional areas such as:
- Taxes;
- Finance;
- Accounting;
- Budgeting;
- Insurance;
- Quality control;
- Purchasing;
- Advertising;
- Marketing;
- Research;
- Health and safety;
- Personnel management;
- Human resources;
- Public relations;
- Government relations;
- Computer networking;
- Database administration; and
- Legal and regulatory compliance.
- Merely working on a production line or selling a product does not qualify as work that is “directly related to the management or general business operations.”
- (ii) The employee’s primary duty must include the exercise of discretion and independent judgment with respect to matters of significance.
- The exercise of “discretion and independent judgment” generally requires that the employee has authority to make an independent choice, free from immediate supervision or direction (though unlimited authority and a complete absence of oversight are not required). Factors to consider include, but are not limited to, whether the employee:
- Has authority to create, impact, interpret, or implement management policies or operating procedures;
- Carries out major assignments or performs work affecting the employer’s operations to a substantial degree;
- Has authority to commit the employer in matters that have significant financial impact;
- Has authority to waive or deviate from established policies and procedures without prior approval;
- Has authority to negotiate and bind the employer on significant matters; and
- Provides consultation or expert advice to management or is involved in planning long- or short-term business objectives.
- “Matters of significance” refers to the level of importance or consequence of the work performed.
- The Administrative Employee exemption depends on the particular duties performed and the extent and import of discretion exercised—not title or industry. For example, while certain employees in the financial services industry may be exempt if their duties primarily involve developing and providing advice and analysis to clients, others in the industry who primarily sell financial products may not qualify for the exemption, even if they share the same title. Likewise, while executive or administrative assistants with significant delegated authority may qualify for the exemption, employees with the same titles who primarily perform clerical duties and do not exercise sufficient discretion and independent judgment with respect to matters of significance may not qualify.
- To qualify as a Professional Employee, the employee must belong to one of the following two categories:
- (i) The employee may be a Learned Professional, requiring that the employee’s primary duty is the performance of work that requires advanced knowledge in a field of science or learning that is customarily acquired by a prolonged course of specialized intellectual instruction.
- “Primary duty” is the principal, main, or most important duty that the employee performs.
- The work performed by a Learned Professional must be predominantly intellectual in character and must require the consistent exercise of discretion and judgment. Work characterized as routine mental, manual, mechanical, or physical work does not qualify.
- Applicable fields of work include law, medicine, theology, accounting, engineering, architecture, teaching, physical/chemical/biological sciences, pharmaceuticals, and other fields that have a recognized professional status.
- The Learned Professional exemption is limited to professions where specialized academic training is a standard prerequisite. The exemption is not available for occupations that are customarily performed with an academic degree in any field or with knowledge primarily acquired through training and experience.
- Common examples of Learned Professionals include lawyers, doctors, physician assistants, dentists, dental hygienists, accountants, registered nurses, and teachers.
- Teachers, lawyers, and doctors do not need to meet the salary basis or salary level tests described above to qualify as exempt.
- For teachers to qualify as learned professionals, their primary duty must be teaching, tutoring, instructing, or lecturing in an educational establishment.
- An “educational establishment” includes elementary schools, secondary schools, higher education institutions, or special schools for mentally or physically disabled or gifted children. Introductory programs (such as nursery school programs) may qualify as educational establishments if they are included in the curriculum for elementary education established by state law, but do not qualify if they primarily provide custodial or babysitting care rather than educational instruction. Post-secondary career programs may also qualify as educational establishments if they are licensed by the appropriate state agency or accredited by a nationally recognized accrediting organization.
- No distinction is drawn between teachers at public, private, for-profit, or non-profit schools.
- Teachers who spend a considerable amount of their time in extracurricular activities, such as coaching sports or leading clubs, still qualify for the exemption.
- (ii) The employee may be a Creative Professional, requiring that the employee’s primary duty is the performance of work that requires invention, imagination, originality, or talent in a recognized field of artistic or creative endeavor.
- “Primary duty” is the principal, main, or most important duty that the employee performs.
- Qualifying fields of artistic or creative endeavor include, but are not limited to, music, writing, acting, and the graphic arts.
- Work characterized as routine mental, manual, mechanical, or physical work does not qualify.
- Work that requires invention, imagination, originality, or talent should be distinguished from work that can be performed by a person with general manual or intellectual ability or training.
- Common examples of Creative Professionals include actors, musicians, composers, and conductors. Other occupations, such as painters, cartoonists, novelists, writers, and journalists may also qualify, depending on how much creativity, originality, and imagination they are able to exhibit in performing their work.
- Alternatively, if an employee is considered a Highly Compensated Employee—that is, if an employee earns a total annual compensation of $107,432 or more, inclusive of at least $684 per week on a salary basis—the employee is deemed exempt if:
- (i) The employee’s primary duty includes the performance of office or non-manual work; and
- “Primary duty” is the principal, main, or most important duty that the employee performs.
- (ii) The employee customarily and regularly performs at least one of the exempt duties of an Executive Employee, Administrative Employee, or Professional Employee, as described above. As long as just one of the duties from any of those tests is satisfied, the other duties do not need to be met.
- “Customarily and regularly” does not mean constant, but it does mean greater than occasional. Tasks performed every workweek typically qualify as tasks performed customarily and regularly.
Outside Salespeople
- An outside sales employee is exempt from the overtime premium requirement if:
- (1) The employee’s primary duty is making sales, securing orders, or obtaining contracts for goods, services, or the use of facilities; and
- “Primary duty” is the principal, main, or most important duty that the employee performs.
- “Sales” relates to both tangible and intangible property.
- (2) The employee is customarily and regularly engaged away from the employer’s place of business.
- “Customarily and regularly” does not mean constant, but it does mean greater than occasional.
- This component is satisfied when an employee makes sales at a customer’s place of business or, when making sales door-to-door, at a customer’s home.
- The use of any fixed site, including the employee’s home or a separate office, is considered the employer’s place of business for purposes of this exemption, even if the employer has no ownership interest in the property. As such, if an employee makes sales from home (or some other fixed location) via the internet, phone, or mail, the employee does not qualify as an exempt outside sales employee.
Commissioned Salespeople
- A commissioned salesperson is exempt from the overtime premium requirement if:
- (1) The employee is employed by a retail or service establishment;
- “Retail or service establishment” is typically defined as an establishment that sells goods or services to the general public, not one involved in the manufacturing process. Department stores, restaurants, and automobile dealers are some examples of retail or service establishments.
- (2) The employee’s regular rate of pay in overtime workweeks exceeds $10.87 per hour for all hours worked; and
- (3) More than half of the employee’s total earnings consist of commissions.
- The timeframe used to determine whether more than half of the employee’s earnings consist of commissions may be as short as one month, but cannot exceed one year.
- An employee paid entirely from commissions automatically satisfies this requirement.
- Mandatory service charges levied by restaurants and hotels, which represent a fixed percentage charged for services, may be considered commissions if all or part of the service charges are paid to service employees. Tips, by contrast, may not be considered commissions.
Computer Professionals
- A computer professional is exempt from the overtime premium requirement if:
- (1) The employee is paid on a salary or fee basis of at least $684 per week (equivalent to $35,568 per year), or on an hourly basis of at least $27.63 per hour; and
- To be paid on a salary basis, the employee must be paid a predetermined and fixed salary, regardless of variations in the quality or quantity of the work performed, for any workweek in which the employee performs any work.
- To be paid on a fee basis, the employee must be paid a predetermined and fixed amount for a single job, regardless of the time required for its completion. Fee basis payments must also be made for the kind of job that is unique, rather than for a series of jobs repeated indefinitely for which payment is made on an identical basis (as is the case for piece-rate payments).
- (2) The employee is employed as a computer systems analyst, computer programmer, software engineer, or other similarly skilled computer worker whose primary duty consists of:
- (1) The application of systems analysis techniques and procedures, including consulting with users, to determine hardware, software, or system functional specifications;
- (2) The design, development, documentation, analysis, creation, testing, or modification of computer systems or programs, including prototypes, based on and related to user or system design specifications;
- (3) The design, documentation, testing, creation, or modification of computer programs related to machine operating systems; or
- (4) A combination of the aforementioned duties, the performance of which requires the same level of skills.
- “Primary duty” is the principal, main, or most important duty that the employee performs.
- The computer professional exemption does not apply to employees engaged in:
- “Help desk” or general troubleshooting roles;
- The computer manufacturing process;
- The repair of computer hardware and equipment; or
- Work that is highly dependent upon computer software, but does not involve primary duties of programming, systems analysis, software engineering, or other similarly skilled duties.
Seasonal Employees
- Employees of seasonal amusement or recreational programs, camps, and religious or nonprofit educational conference centers are exempt from the overtime premium requirement.
- To qualify as “seasonal” in this context, such an establishment must:
- (1) Not operate for more than seven months in any calendar year; or
- If a program only engages in non-public activities during the “off season,” such as performing maintenance work or ordering supplies, it is not considered to be operating for purposes of this exemption.
- (2) Accrue, during any (not necessarily consecutive) six months of the preceding calendar year, average receipts of not more than one-third of its average receipts for the remaining six months of such year.
- For example, if a seasonal program otherwise eligible for exemption earns $150,000 in its most profitable six months of the year, and earns $30,000 in the remaining six months of the year, employees of the program are exempt from the overtime premium requirement because the program’s average receipts in the remaining six months, equal to $5,000 per month, are less than one-third of its average receipts in its most profitable six months, equal to $25,000 per month.
- Examples of exempt establishments may include amusement parks, concession stands at baseball stadiums, and ice skating rinks.
Employees of Motor Carriers
- An employee of a motor carrier—an entity that provides motor vehicle transportation for compensation, such as a trucking company—is exempt from the overtime premium requirement if:
- (1) The employee’s duties affect the safety of a motor vehicle used in transportation in interstate or foreign commerce; and
- Employees whose duties affect the safety of a motor vehicle include drivers, driver’s helpers, loaders, and mechanics. By contrast, employees such as dispatchers, office personnel, and unloaders do not engage in safety-affecting activities for purposes of this exemption.
- To be used in interstate or foreign commerce, the transportation must be across state or international lines, or must connect with an intrastate terminal (rail, air, water, or land) while in the process of being transported across state or international lines. A safety-affecting employee may satisfy this requirement even if the employee does not personally make the interstate or foreign trip.
- (2) The only motor vehicles worked on in the workweek have a gross vehicle weight rating (GVWR) or gross combined vehicle weight rating (GCVWR) of greater than 10,000 pounds, except for vehicles that are:
- (1) Used or designed to transport more than 8 passengers, including the driver, for compensation;
- (2) Used or designed to transport more than 15 passengers, including the driver, not for compensation; or
- (3) Used to transport hazardous material and require placarding under DOT regulations.
- This exemption does not apply to employees of non-carriers, such as maintenance and repair shops, commercial garages, or motor vehicle rental companies.
Dealership Employees
- An employee of a dealership selling automobiles, trucks, farm implements, trailers, boats, or aircraft is exempt from the overtime premium requirement if the employee is:
- (1) A salesperson primarily engaged in making sales or obtaining orders or contracts for sale of the automobiles, trucks, farm implements, trailers, boats, or aircraft that the dealership sells and does not manufacture. Incidental work, such as deliveries and collections, is also regarded as exempt;
- Service advisors—employees who consult with customers about their servicing needs and sell them servicing solutions—are included in the definition of salespeople for purposes of this exemption.
- “Primarily engaged” means over 50 percent of the time spent working.
- (2) A partsman primarily engaged in requisitioning, stocking, and dispensing parts at a dealership selling and not manufacturing automobiles, trucks, or farm implements; or
- “Primarily engaged” means over 50 percent of the time spent working.
- (3) A mechanic primarily engaged in performing mechanical work, such as “get ready” mechanics, vehicle mechanics, reconditioning mechanics, and wrecker mechanics, including all mechanical work required for safe operation, at a dealership selling and not manufacturing automobiles, trucks, or farm implements.
- For purposes of this exemption, a mechanic does not include an employee primarily engaged in non-mechanical work such as painting, washing, cleaning, tire changing, polishing, dispatching, lubricating, or installing seat covers.
- “Primarily engaged” means over 50 percent of the time spent working.
Agricultural Employees
- Most agricultural employees are not exempt from the overtime premium requirement. However, an agricultural employee may be exempt if any of the following conditions apply:
- (1) The employer did not use more than 500 “man days” of agricultural work in any calendar quarter (January 1–March 31; April 1–June 30; July 1–September 30; October 1–December 31) of the preceding calendar year;
- A “man day” is any day during which an employee performs agricultural work for at least one hour. Assuming farm employees work at least one hour each day, “man days” can be calculated by multiplying the number of employees on a farm by the number of days worked per week and by the number of weeks worked in the calendar quarter.
- For example, if a farm employed 8 workers for 5 days per week for 13 weeks (a full calendar quarter) in the preceding calendar year, the farm used 520 “man days” of agricultural work (8 workers x 5 days per week x 13 weeks) in the calendar quarter.
- (2) The employee is the immediate family member of the employer;
- “Immediate family member” for purposes of this exemption includes parents, spouses, children, step-parents, foster parents, step-children, and foster children.
- (3) The employee is principally engaged in the range production of livestock;
- To be engaged in the production of livestock, an employee must actively take care of the animals or stand by in readiness of that responsibility. Activities such as herding, transporting, feeding, watering, branding, or protecting the animals would qualify as the production of livestock.
- (4) The employee is a local hand harvest laborer who commutes daily from his or her permanent residence, is paid on a piece-rate basis, and was employed in agriculture for less than thirteen weeks during the preceding calendar year; or
- Hand-harvesting is defined as manually gathering or severing crops from the soil, stems, or roots using only hands or hand tools, not electronically powered mechanical devices.
- (5) The employee is a non-local hand harvest laborer who is 16 years of age or under, is paid on a piece-rate basis, is employed on the same farm as his or her parent (or person standing in the place of his or her parent), and is paid at the same piece rate as employees over 16 years of age.
Babysitters Employed on a Casual Basis
- A babysitter is exempt from the overtime premium requirement if the babysitter is employed on a “casual basis,” generally requiring irregular or intermittent and non-vocational babysitting.
- Full-time babysitting, or regularly-scheduled babysitting in excess of 20 hours per week, ordinarily does not qualify as babysitting on a “casual basis.”
- A casual babysitter may perform some household work not directly related to caring for children, such as cleaning the house, but if such work exceeds 20% of the total time spent on a particular babysitting assignment, the overtime exemption will not apply.
Live-In Domestic Service Employees
- Domestic service employees providing services of a household nature or in a private home—including, but not limited to, maids, housekeepers, nannies, companions, babysitters, chefs, butlers, caretakers, handymen, maintenance workers, gardeners, landscapers, home health aides, and chauffeurs—are exempt from the overtime premium requirement if they live on their employer’s premises either permanently or for an extended period of time.
- To live on an employer’s premises permanently, an employee must live, work, and sleep on the employer’s premises seven days per week and have no home of his or her own (other than the one provided by the employer).
- To live on an employer’s premises for an extended period of time, an employee must live, work, and sleep on the employer’s premises at least five days per week (120 hours or more), or must otherwise live on the premises for at least five consecutive days or nights.
- An employee does not live on the employer’s premises for an extended period of time if the arrangement is temporary in nature, such as for three weeks only.
- An employee who works 24-hour shifts, but does not reside on the employer’s premises either permanently or for an extended period of time, does not qualify for the exemption.
- Only private individual, family, or household employers may claim the exemption. Third-party employers, such as home care agencies, cannot claim the exemption, even if the employee is jointly employed by a private household.
Companionship Employees
- An employee hired to provide “companionship services” to an elderly person or a person with an illness, injury, or disability is exempt from the overtime premium requirement.
- “Companionship services” is defined to mean the provision of fellowship (social, physical, and mental engagement, such as playing games, doing crafts, engaging in conversation, and accompanying the person on walks, errands, appointments, and social events) and protection (monitoring safety and well-being) to the person in need.
- An employee providing companionship services may perform some general care tasks, such as assisting the person with meal preparation, transportation, light housework, managing finances, taking medications, arranging medical care, getting dressed, eating, bathing, and grooming, but if such work exceeds 20% of the total hours worked by the employee, the overtime exemption will not apply.
- Only private individual, family, or household employers may claim the exemption. Third-party employers, such as home care agencies, cannot claim the exemption, even if the employee is jointly employed by a private household.
Fishing Employees
- Employees engaged in the fishing industry are exempt from the overtime premium requirement if the employees are:
- (1) Employed in the catching, taking, propagating, harvesting, cultivating, or farming of any kind of fish, shellfish, crustacea, sponge, seaweed, or other aquatic form of animal and vegetable life; or
- Integral work performed in connection with exempt fishing operations, such as maintenance work on a fishing boat or mending fishing nets, is typically considered exempt as well.
- (2) Employed in the first processing, canning, or packing of any kind of fish, shellfish, crustacea, sponge, seaweed, or other aquatic form of animal and vegetable life, while at sea, in conjunction with fishing operations.
- “First processing” activities are ordinarily performed on a fishing boat immediately after catching seafood, such as freezing, filleting, scaling, salting, loading, and unloading.
- These activities are only exempt if performed at sea. The exemption does not cover workers who perform onshore work after unloading, even if such workers perform otherwise exempt duties, such as seafood canning and packing.
Sailors/Seamen
- Employees who work as sailors/seamen are exempt from the overtime premium requirement if they perform work on a vessel that is primarily designed to aid in the operation of the vessel as a means of transportation.
- A number of crew members may qualify for the exemption under this expansive definition, including engineers, radio operators, surgeons, cooks, and stewards.
- Unlike the minimum wage exemption, the overtime exemption applies to all vessels. It is not limited to non-American vessels.
- A sailor/seaman can spend up to 20% of his or her time performing non-sailor/seaman duties and remain exempt. If over 20% of the employee’s time is spent performing non-sailor/seaman duties, however, the employee cannot be classified as exempt.
- The exemption applies equally to vessels navigating inland waters and coastal or ocean-going vessels.
Air Carrier Employees
- An air carrier employee is exempt from the overtime premium requirement if at least 80% of the employee’s duties are related to air transportation.
- The employee’s duties must consist of work traditionally performed by employees of air carriers, such as acting as a pilot or flight attendant. Employees hired to perform cleaning services or mechanical work on the ground, by contrast, may not fall within the exemption.
- An air carrier generally must offer its services to the public or a definable segment of the public in order for its employees to potentially fall within the exemption. As such, while employees of commercial airlines and air ambulance companies may fall within the exemption, corporate jet employees may not.
- Notwithstanding this exemption, as a practical matter, many airline employees are covered by collective bargaining rules that govern wages.
Railroad Employees
- A railroad employee is exempt from the overtime premium requirement if at least 80% of the employee’s duties are related to railroad transportation.
- For a railroad employee to be exempt, the railroad must be engaged in interstate commerce in the transportation of passengers or property by railroad.
- The exemption includes railroad carriers, express companies, sleeping car companies, and refrigerator car companies.
- Notwithstanding this exemption, as a practical matter, many railroad employees are covered by collective bargaining rules that govern wages.
Taxicab Drivers
- An employee who drives for a taxicab business is exempt from the overtime premium requirement.
- The exemption only applies to employees who actually drive. Other employees of taxicab businesses, such as dispatchers, managers, and administrative employees, are not exempt under this exemption.
- To qualify as a taxicab business under this exemption, a company typically must operate passenger vehicles that are available for hire by the general public and do not operate on fixed schedules, routes, or contracts for recurrent transportation. Limousines for hire often do not qualify for the exemption. Medical transportation companies also do not qualify for the exemption.
Small Market Television and Radio Employees
- An employee that is an announcer, news editor, or chief engineer for a small market television or radio broadcaster is exempt from the overtime premium requirement.
- To qualify as a small market broadcaster for purposes of this exemption, the broadcaster’s main studio (not a secondary studio) must be located in a city or town that either:
- (1) Has a population of 100,000 or less, as long as the city or town is not within a larger metropolitan area that has a population greater than 100,000; or
- (2) Has a population of 25,000 or less, even if the city or town is within a larger metropolitan area that has a population greater than 100,000, as long as the smaller city or town is at least 40 miles from the principal city in the larger metropolitan area.
- An announcer for purposes of the exemption is an employee who appears before the microphone or camera to introduce programs, read news announcements, present commercial messages, give station identification and time signals, and present other similar routine on-the-air material.
- A news editor is an employee who gathers, edits, and rewrites the news. The employee may also select and prepare news items for broadcast and present the news on the air.
- A chief engineer is an employee who primarily supervises the operation, maintenance, and repair of all electronic equipment in the studio and at the transmitter, and is licensed by the FCC as a Radio Telephone Operator First Class.
- Where two or more engineers are employed by a station, only one may qualify as “chief engineer.”
Elected Officials, Their Appointees, and Legislative Employees
- Elected officials, personal staff members of elected officials, officials in policy-making positions selected by elected officials, and certain advisors to elected officials are exempt from the overtime premium requirement.
- Personal staff members only include those who are under the direct supervision of the elected official and who have regular contact with the elected official. They do not include individuals directly supervised by someone else, even if they are selected by the elected official.
- Officials in policy-making positions must be selected by the elected official and outside of any applicable civil service laws to be exempt. Individuals who merely implement or apply policy are not exempt under this exemption.
- Advisors to elected officials are exempt if they advise as to constitutional or legal matters and are outside of any applicable civil service laws.
- Employees of legislative branches outside of any applicable civil service laws are also exempt from the overtime premium requirement, including employees in the state legislature or county or city councils or boards.
- Employees of state or local legislative libraries and school boards (except as provided above regarding elected officials) do not come within the exemption.
Law Enforcement and Fire Protection Employees (Partial Exemption for All Agencies; Full Exemption for Small Agencies)
- For public agencies that employ five or more employees in law enforcement or fire protection activities, the calculation of overtime premiums are subject to special rules (a “partial exemption”):
- Instead of being compensated on a typical “workweek” basis (i.e. a fixed, regularly recurring period of 168 hours, usually defined as Sunday through Saturday or Monday through Sunday), overtime entitlements for law enforcement and fire protection employees are measured on a “work period” basis, consisting of anything between 7 consecutive days to 28 consecutive days in length, as adopted by the agency.
- For an employee engaged in law enforcement activities, overtime premiums are not owed until the employee has worked a total of 171 hours during a 28-day period (or the prorated equivalent, if the defined work period is shorter than 28 consecutive days).
- For example, if the work period is 14 days, a law enforcement employee must receive overtime after 86 hours of work; if the work period is 7 days, a law enforcement employee must receive overtime compensation after 43 hours of work.
- To qualify as an employee engaged in law enforcement activities, an employee must:
- (1) Be a uniformed or plainclothes member of a body of officers and subordinates;
- (2) Be empowered by state or local ordinance to enforce laws designed to maintain peace and order, protect life and property, and prevent and detect crimes;
- (3) Have the power to arrest; and
- (4) Have undergone or will undergo training in law enforcement.
- Assuming these requirements are met, an employee’s rank or status as a trainee or probationary employee are irrelevant for purposes of this partial exemption.
- For an employee engaged in fire protection activities, overtime premiums are not owed until the employee has worked a total of 212 hours during a 28-day period (or the prorated equivalent, if the defined work period is shorter than 28 consecutive days).
- For example, if the work period is 14 days, a fire protection employee must receive overtime after 106 hours of work; if the work period is 7 days, a fire protection employee must receive overtime compensation after 53 hours of work.
- To qualify as an employee engaged in fire protection activities, an employe must:
- (1) Be trained in fire suppression;
- (2) Have the legal authority and responsibility to engage in fire suppression;
- (3) Be employed by a fire department of a municipality, county, fire district, or state; and
- (4) Be engaged in the prevention, control, and extinguishment of fires or response to emergency situations where life, property, or the environment is at risk.
- Assuming these requirements are met, an employee engaged in fire protection activities does not necessarily need to be a firefighter. The employee could also be, for example, a paramedic, EMT, rescue worker, ambulance worker, or hazardous materials worker.
- The partial exemption is only available to public agencies, not private organizations, even if the private organization furnishes law enforcement or fire protection services and does so under contract with a public agency.
- *Small agency exception: Notwithstanding the partial exemption referenced above, public agency employees engaged in law enforcement or fire protection activities are exempt from the overtime premium requirement in its entirety if the agency employs less than five employees in the same activities.
- In computing the number of employees, law enforcement activities and fire protection activities are considered separately. Accordingly, if a public agency employs five or more employees in law enforcement activities, but less than five employees in fire protection activities, the exemption applies for the fire protection employees only.
Hospital and Residential Care Establishment Employees (Partial Exemption)
- Employees of hospitals or residential care establishments primarily engaged in the care of sick, elderly, or mentally ill patients—such as nursing facilities, assisted living facilities, residential care facilities, and intermediate care facilities for individuals with disabilities—are entitled to overtime premiums, but the calculations of such premiums are subject to special rules (a “partial exemption”).
- Instead of paying overtime premiums for hours worked over 40 in a workweek, a hospital or residential care establishment can, with the prior agreement or understanding of the affected employee, pay overtime premiums only for hours worked in excess of 8 in a workday or 80 in a 14-day period, whichever is the greater number of overtime hours (known as the “8 and 80” method).
- An employer can use the standard 40-hour overtime method for some employees, and the “8 and 80” method for other employees, but it cannot use both systems for a single employee.
- The work period under the “8 and 80” method must be a fixed and regularly recurring 14-day period. It may be changed, but the change must be permanent—a change cannot be implemented merely to evade the overtime premium requirement.
Other Partial Exemptions
- Other partial overtime exemptions available under the law are fairly specific and uncommon, including:
- Employees of wholesale or bulk distributors of petroleum products (requiring overtime premiums for hours worked in excess of 12 in a workday and 56 in a workweek);
- Employees in the tobacco industry (requiring overtime premiums for hours worked in excess of 10 in a workday and 48 in a workweek, for up to 14 weeks a year);
- Employees of private concessionaires in national parks, national forests, and land within the National Wildlife Refuge System (requiring overtime premiums for hours worked in excess of 56 in a workweek);
- Cotton ginning employees (requiring overtime premiums for hours worked in excess of 10 in a workday and 48 in a workweek, for up to 14 weeks a year);
- Sugar processing employees (requiring overtime premiums for hours worked in excess of 10 in a workday and 48 in a workweek, for up to 14 weeks a year); and
- Employees receiving remedial education (allowing employers to require employees to spend up to 10 hours in a workweek in remedial education, without payment of overtime compensation, if the education is provided to employees lacking a high school diploma or educational attainment at the eighth grade level, is designed to provide reading and other basic skills at an eighth grade level or below, and does not include job specific training).
Compensatory Time Off (Comp Time)
- For public sector employers only (not private sector employers), compensatory time off—commonly referred to as “comp time”—is an alternative available in lieu of cash overtime.
- Comp time enables public sector employers to provide their employees with paid time off instead of cash for overtime hours worked.
- Similar to cash overtime earned by private sector employees, public sector employees earn comp time at a rate of one and one-half hours of paid time off for each overtime hour worked in a workweek. Comp time cannot be issued on an hour-for-hour basis.
- Before using the comp time method, a public sector employer must secure an agreement or reach an understanding with affected employees.
- Generally, as long as a public sector employer provides adequate notice of its decision to use comp time before affected employees perform work, the use of comp time is lawful.
- A formal written agreement is not necessary, but some sort of record—which may include a personnel policy or some other documentation indicating that affected employees have been notified—is required.
- The law imposes a comp time accrual limit. Public sector employees may only accrue up to 240 hours of comp time or, in the case of public sector employees who regularly work in public safety, emergency response, or seasonal activities, such as law enforcement officers, firefighters, and emergency medical personnel, up to 480 hours of comp time.
- After the maximum number of hours are accrued, public sector employees must be paid in cash at one and one-half times their regular rate of pay for all overtime hours worked.
- Public sector employers are free to set accrual limits lower than the 240- or 480-hour limits upon which time overtime must be paid in cash.
- Public sector employees paid using the comp time method must be able to use accrued paid time off within a reasonable period after making a request, as long as use of such time off does not unduly disrupt the employer’s operations.
- Comp time cannot be made subject to a “use it or lose it” policy, nor may it be converted to sick or vacation leave.
- When an employee’s employment ends for any reason, including retirement, resignation, or termination, the value of any accrued and unused comp time must be paid out to the employee at the higher of these two options: (1) one and one-half times the average regular rate received by the employee during his or her last three years of employment; or (2) one and one-half times the final regular rate received by the employee.
