Minimum Wage Exemptions & Overtime Exemptions Under the FLSA
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Charlette has over 10 years of experience in accounting and finance and 2 years of partnering with HR leaders on freelance projects. She uses this extensive experience to answer your questions about payroll.
Jennifer Soper is an HR Specialist and staff writer for Fit Small Business, with over 15 years of experience in accounting, payroll, and human resources.
This article is part of a larger series on Hiring.
Most employers are legally required to pay a certain minimum wage to their employees (at least $7.25 an hour to comply with federal laws) and pay overtime for hours worked over 40 in a work week (at least 1.5 times the regular pay rate). However, the Fair Labor Standards Act (FLSA) provides minimum wage and overtime exemptions for certain jobs and demographics in some circumstances.
If your business is in one of the following commonly exempt industries or you pay the following types of workers, you may be exempt from minimum wage and/or overtime rules:
Industry/Company | Worker Type |
|---|---|
|
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Let’s take a closer look.
Workers Exempt From Both Minimum Wage Laws & Overtime Pay
While the FLSA guidelines are wide-reaching, there are some industry and worker type exemptions to both minimum wage and overtime. For a full list of minimum wage and overtime exemptions visit the US Department of Labor.
You will see references in the sections below to a salary test. Under the FLSA, employees are exempt from overtime if they can satisfy three salary tests:
- Salary Level: This means the employee’s salary is above a certain threshold
- Salary Basis: This means the employee is paid a fixed weekly salary that does not fluctuate
- Duties Test: This means the employee’s primary duties are exempt because they are primarily executive, professional, or administrative, as defined by DOL regulations
If an employee does not “pass” all three tests, they are considered a nonexempt employee and must be paid overtime for all hours worked over 40 in a workweek.
To learn more about salary test exemptions read our article on the difference between exempt and nonexempt employees.
Certain executives are exempt from minimum wage and overtime pay. In general, they must meet these requirements:
- Pass the salary test
- Have the primary duty of managing the enterprise or a recognized department or subdivision of the enterprise
- Customarily and regularly direct work of two or more full-time employees (or their equivalent)
- Have hiring and firing authority or weight in hiring and firing decisions
Some administrative jobs are also exempt from minimum wage and overtime pay. In general, they must meet these requirements:
- Pass the salary test
- Have the primary duty of office or non-manual work directly related to management or general business operations
- Have primary duties involving exercising discretion and independent judgment in matters significant to the business
Normally, this applies to doctors, lawyers, and teachers. However, the definition also includes learned or creative professionals. Learned professionals use advanced knowledge in science or learning and have an advanced degree or specialized instruction.
Creative professionals can include actors, musicians, writers, cartoonists, essayists, and, on some occasions, journalists. The salary test applies.
Outside sales employees do not need to meet the salary test. However, their basic duties must involve making sales or obtaining orders and contracts, which must be done away from the employer’s place(s) of business.
Seasonal workers, whether on a farm or at an amusement park, are exempt from minimum wages. (Year-round employees will still be subject to minimum wage laws.) You may, however, encounter some differences in your state. For instance, in Massachusetts, seasonal businesses are still required to pay minimum wage, but may be exempt from paying overtime if
- Your business is approved by the Massachusetts Department of Labor as a seasonal business
- You do not operate for more than 120 days out of the year.
Additionally, in Pennsylvania, seasonal employees are covered by most of the same employment laws that apply to nonseasonal employees, including provisions for nondiscrimination, health and safety, wages and hours, employment taxes, and workers’ compensation. Check the Department of Labor laws for your state.
If you have a farm and used fewer than 500 man-days of farm labor in the previous calendar year, you are exempt from the minimum wage requirements. Employees of small fishing operations are also exempt.
Need to know how to pay your farm workers? Learn more in our article on agricultural payroll.
- Casual babysitters
- Persons employed as companions to the elderly or infirm
- Federal criminal investigators
- Switchboard operators
- Seamen
- Fishing
When hiring these types of workers refer to our article on employment laws.
Workers Exempt From Minimum Wage Laws Only
Certain employee groups are exempt from federal minimum wage requirements, but still require overtime pay for work performed in excess of a standard workweek.
Workers Exempt From Overtime Pay Laws Only
There are several types of employees that are exempt from overtime pay but not exempt from minimum wage requirements.
- Commissioned employees, such as vehicle salespeople (trucks, cars, farming machinery, boats, aircraft), vehicle parts salespeople, and mechanics
- Employees of railroads and air carriers, taxi, seamen on American vessels, and local delivery employees paid by trip rate
- Announcers, news editors, and chief engineers of non-metropolitan broadcast stations
- Live-in domestic service workers
- Employees of motion picture theaters
- Farmworkers
Partial Exemptions to Overtime Pay
There are also some partial exemptions.
- Those involved in distributing specified bulk petroleum products or agricultural commodities (such as truckers) may be exempt.
- Hospitals can adopt a 14-day work week, with overtime at the 80-hour mark.
- First responders may adopt a work period of up to 28 days. In this case, overtime starts at the ratio of 212 hours per 28 days for fire personnel and 171 hours per 28 days for law enforcement. See the DOL fact sheet for details.
- Employees who lack a high school diploma don’t have to be paid overtime if the extra hours are part of a remedial reading or training program. (They should earn regular wages, however.)
To learn about other payroll laws employers must comply with, check out our articles on payroll compliance and federal labor laws.
Paying Minimum Wage and/or Overtime
Most businesses must comply with minimum wage and overtime rules when doing payroll as most employees are “covered” under federal laws. The law holds accountable any businesses with employees engaged in interstate commerce; who produce or handle goods for interstate commerce; or who handle, sell, or otherwise work on goods or materials that have been moved or produced for commerce by any person, including those in communication and transportation. That’s nearly any business.
It also covers:
- Businesses that earn at least $500,000 annual gross volume of sales/business done
- Businesses that operate hospitals/institutions that care for the sick, aged, or mentally ill
- Schools and institutions of higher education (for-profit and some nonprofit)
- Public agencies
Workers such as guards, janitors, and maintenance employees who perform duties that are related to/essential for interstate activities are also covered by FLSA. These laws also generally apply to domestic workers.
If your business was covered by FLSA on March 31, 1990, but does not meet the $500,000+ volume of sales or business, you may be exempt from the minimum wage requirement. However, you are still subject to the overtime pay provisions of the FLSA.
Bottom Line
Minimum wage and overtime pay are hot topics for businesses, and with good reason. It’s important not only to your employees but also for you to stay on the right side of the law. There are exemptions to the wage rules, but they are carefully defined by the FLSA.
Please note that this article provides general guidelines based on federal exemptions to overtime and minimum wage. If you think you may qualify for an exemption, check with your local DOL Wage and Hiring Office for more information and to apply for the necessary certificates.
