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HR Support on the Executive Exemption

Editor's Note: The executive exemption is not just for CEOs; lower-level supervisors can be exempt from overtime, too.

Michael CardmanOverview: In the popular imagination, the word executive brings to mind images of a CEO or a company president, sitting in the corner office and overseeing hundreds or even thousands of employees. But under the Fair Labor Standards Act (FLSA) and many state wage and hour laws, employees who supervise as few as two full-time employees can also qualify as executives. For this reason, a variety of employees one might not normally think of as executives - such as convenience store managers, chefs and construction superintendents - can qualify as executives and be exempt from the law's overtime requirements.

Besides directing the work of two or more employees, executives must also:

  • Be compensated on a salary basis;
  • Have a primary duty of managing the business or a recognized department or subdivision of the business; and
  • Make, or at least influence, hiring and firing decisions.

Trends: Effective January 1, 2020, a final overtime rule from the US Department of Labor (DOL) increased the minimum salary for executive employees from $455 per week (or $23,660 per year) to $684 per week (or $35,568 per year). The rule also allows employers to count nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10% of the standard salary level test, as long as they are paid annually or more frequently.

Author: Michael Cardman, Legal Editor

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HR guidance on complying with the federal and state requirements for the executive exemption.

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