How Do You Determine Who Is Exempt From Overtime?

There are five different tests that must be met in order to be classified as exempt. When an employer classifies an employee as exempt from minimum wage and overtime, it is up to the employer to establish that the employee meets the criteria for exempt status. There are three categories of “white collar” employees that may qualify for exempt status, executives (supervisors), administrative managers and professional employees. Both federal and state regulations require that employees must satisfy all of the duties tests and also be paid a genuine salary to be classified as exempt employees. The Duties Tests Exempt executives (supervisors) must satisfy the following duties tests:

  • Primarily manage a distinct unit or subdivision within the organization.
  • Spend most of the workweek performing management duties. This generally means more that 50 percent of the work time, however, other factors might support exempt status if less than 50 percent of work time is spent in management. Other factors could include: the employee is paid a significantly higher salary than is paid to nonexempt staff; the employee makes frequent management decisions; the employee is free from direct supervision.
  • Supervise two or more full­time employees (or the equivalent of two or more).
  • Have hiring or firing authority or, if not full authority, their recommendations are given particular weight.
  • Customarily and regularly exercise authority to make decisions of significance.

Exempt administrative employees must:

  • Primarily perform office or non­manual work directly related to management policies or general business operations. The work must be distinguished from production or sales work and is limited to duties directly related to the running of a business and not merely the day­to­day carrying out of its affairs.
  • Perform work as an administrative assistant, such as an executive’s assistant who has management duties; a staff employee, such as an advisory specialist or department head; or as a special assignment employee such as a field manager.
  • Spend most of the workweek performing management duties. As with exempt executives, this generally means more than 50 percent of work time; however, other factors might support exempt status.
  • Customarily and regularly exercise authority to make decisions of significance.

Professional employees must:

  • Primarily perform work as professionals in either learned or artistic professions, or as teachers in an educational institution or as highly skilled computer professionals. Learned professionals, teachers and highly skilled computer professionals are those who have attained knowledge of an advanced type customarily acquired by a prolonged course of specialized intellectual instruction and study. A four­year degree may satisfy this requirement, however associate degrees do not.
  • Spend most of the workweek performing professional duties. This generally means more than 50 percent of work time; however, other factors may be considered if less than 50 percent of the week is spent in professional work.
  • Perform work that is predominantly intellectual and varied rather than routine, manual, mechanical, or physical.
  • Consistently exercise discretion and independent judgment.

The Salary Test In addition, exempt employees must be paid on a genuine salary basis as opposed to hourly or other methods of payment. The minimum salary in Oregon is higher than the federal requirement and is based on the statutory minimum wage rate. Therefore as the Oregon minimum wage rate increases, the minimum salary for exempt employees also increases.

    Example: The Oregon minimum wage rate was $6.50 per hour effective January 1, 1999, and the minimum weekly salary for exempt employees was 40 times $6.50 or $260 per week. Because the Oregon minimum wage increased to $6.90 on January 1, 2003, the new minimum weekly salary requirement is $276. Note: Currently, under federal law, if the minimum salary of an exempt employee is less than $250 per week, the employee must spend no more than 20% (40% if retail) of his or her workweek performing nonexempt duties. This is commonly referred to as the “long test.”

The salary must be a predetermined amount that is not varied based on quantity or quality of work. Exempt employees need not be paid for weeks in which no work is performed, however the general rule requires that the employee receive the full salary for any week in which work is performed without regard to the number of hours or days worked. The general rule is subject to exceptions as follows:

  • Salary may be prorated (reduced) if an exempt employee takes a day or more off for personal reasons, other than sickness or accident.
  • Salary may be reduced for absences of a day or more for sickness or disability if the reduction is made according to the employer’s plan, policy or practice of providing paid sick or disability leave. For example, if an employer has a paid sick leave plan and the employee has exhausted all available paid leave under that plan, then his or her salary may be reduced by those absences of a day or more for sickness or disability.
  • If the employee performs any work during the workweek when serving on jury duty, military leave or when attending a proceeding as a witness, the exempt employee’s weekly salary must be paid. However, the employer may offset any amounts received by the employee as jury or witness fees or military pay for that week.
  • Reductions in an exempt employee’s salary may not be made as a disciplinary measure unless the penalty is imposed for violations of safety rules of major significance such as smoking in an explosive plant or oil refinery. However, if the employee is suspended for a full workweek, and no work is performed during that week, no salary is required.
  • In private sector employment, the exempt employee’s salary may not be reduced when an employee is absent for part of a day, unless the absence qualifies as leave taken under the federal Family and Medical Leave Act. (Special rules apply to government agencies).

Computer Professionals In addition to the foregoing tests for professional employees, federal rules require that computer professionals must primarily perform work in one or more of the following categories to qualify for exemption:

  • The application of systems analysis techniques and procedures including determination of hardware, software, or system functional specifications; or
  • The design, development, documentation, analysis, creation, testing or modification of computer systems or programs; or
  • The design, documentation, testing, creation or modification of computer programs related to machine operating systems.

When employees are classified as exempt computer professionals, Oregon Administrative Rules require that such employees have advanced educational degrees. However, since these duties may be directly related to management policies, and to the implementation of business operations, they may qualify as exempt administrative employees without the degrees. Separate Exemption for Skilled Computer Technicians In addition, both federal and state laws provide a separate exemption for employees who perform work in the previously listed categories, and who are paid an hourly rate of at least $27.63 per hour. Because the state exemption was adopted using the same conditions as the FLSA exemption at 13 (a) (17), no degree is required.

Speak to an Experienced Employment Law Attorney Today

This article is intended to be helpful and informative. But even common legal matters can become complex and stressful. A qualified employment lawyer can address your particular legal needs, explain the law, and represent you in court. Take the first step now and contact an attorney in your area from our directory to discuss your specific legal situation.

Your Next Step:

Enter your location below to get connected with a qualified Employment Law attorney today.

Additional Employment Law Articles