The federal Fair Labor Standards Act (FLSA) sets the federal rules for which employees are covered by the minimum wage and overtime pay standards. However, certain types of employees are exempt from these pay standards. In 2004, the United States Department of Labor changed the rules used to determine exempt employees.

FairPay Regulations

The FairPay regulations enacted in 2004 changed the standards for determining when certain employees--bona fide executive, administrative, professional and outside sales employees--are exempt from the minimum wage and overtime pay rules. The rules were also changed for employees in computer-related occupations.

Salary Test

A basic requirement for the white collar exemptions is that the employee is paid on a salary basis at not less than $455 per week. For computer-related occupations the employee must be paid at least $455 per week or if paid on an hourly basis, not less than $27.63 an hour.

Job Duties Test

The FairPay regulations set out the duties that the white collar employee must perform to be considered exempt.

Exemption

For the employee to be exempt under the white collar exemptions, both the salary test and the job duties test must be met.

Restrictions on Pay Deductions

Being paid on a salary basis limits the right of the employer to make certain deductions from the exempt employee's pay. For example, with some exceptions, an exempt employee must be paid in full for any week in which the employee performs any work, despite the number of days or hours worked.

State Laws

States may have different standards. Where the state law sets a stricter standard for white collar exemptions, the state law standard applies.

Source:

U.S. Department of Labor