SR Glossary: Exemption to DoL Overtime Rules

The U.S. Department of Labor and the State of Michigan have regulations which state that an employee shall receive compensation at not less than 1-1/2 times the regular rate at which the employee is employed for employment in a workweek in excess of 40 hours.

However, the following are exempt:

  • An employee employed in a bona fide executive, administrative or professional capacity
  • An individual who holds public elective office
  • A political appointee of a person holding public elective office
  • An employee employed by an amusement or recreational establishment that does not operate more than 7 months per year
  • An employee who is not subject to minimum hourly wage provisions

Some examples of employees and their qualifications:

Administrative employees would be the employees that most your businesses might have. Qualifications for exemption must meet all of the following conditions for this group:

  • The employee must be compensated on a salary or fee basis at a rate not less than $450 per week.
  • The employee’s primary duty must be the performance of office or non-manual work directly related to the management or general business operations of the employer or the employee’s customers.
  • The employee’s primary duty includes the exercise of discretion and independent judgment with respect to matters of significance.

Discretion and independent judgment essentially, means that the employee has the ability and freedom to make an independent choice, free from supervision.

Examples of non qualifying duties: Bookkeeper, secretaries, bank tellers and clerical employees who perform routine work are not generally considered exempt employees. The mere discretion of when to perform clerical tasks does not qualify as “discretion and independent judgment.”

Computer employees would only qualify if they meet the compensation test above and are employed as:

  • Computer systems analyst
  • Computer programmer
  • Software engineer

Learned Professionals will qualify if:

  • Compenation as stated above
  • The employee’s primary duty must be the performance of work requiring advanced knowledge, defined as work which is predominantly intellectual in character and which includes work requiring the consistent exercise of discretion and judgment
  • The advanced knowledge must be in the field of science or learning
  • The advanced knowledge must be customarily acquired by a prolonged course of specialized intellectual instruction.

Creative Professionals will qualify if:

  • Compensation as stated above
  • The employee’s primary duty must be the performance of work requiring invention, imagination, originality or talent in the recognized field of artistic or creative endeavor.

Retail salespersons on salary or commissions need not be paid overtime rates if:

  • The regular rate of pay is at least 1-1/2 times the applicable statutory minimum wage, and
  • More than half of the compensation for a representative period (one month or longer) comes from commissions

The above examples are simplistic examples of a complicated area of Wage and Hour Laws.  You may think that just because an employee receives a large salary, he/she would be exempt from overtime rules. But that is not always the case.  If you have questions about the nuances of your employees’ roles contact us.  We can help steer you through this landmine filled area of business.