The Fair Labor Standards Act (FLSA) provides minimum wage and overtime pay protections for most employees. Some workers, including bona fide executive, administrative, and professional employees are exempt from those protections. To be considered exempt, an employee must meet each of the following 3 tests.
- Salary basis test - The employee must be paid a predetermined and fixed salary that is not subject to reduction because of variations in the quality or quantity of work performed
- Salary level test – The amount of salary paid must meet a minimum specified amount
- Duties test – The employee’s job duties must primarily involve executive, administrative, or professional duties
- The standard salary level has been set at $913 per week or $47,476 annually. This means that in order for a salaried employee to be considered exempt from the federal overtime rules, their salary must be at least $47,476 for a full-time employee.
- The total annual compensation requirement for highly compensated employees subject to a minimum duties test will be $134,004.
- The new salary and compensation levels will be updated every 3 years with the first update taking place on January 1, 2020.
- Employers may use nondiscretionary bonuses and incentive payments such as commissions to satisfy up to 10 percent of the new standard salary level.