Skip to main content
A Better Partnership


Apr 2004
April 21, 2004

Human Resources E-Mail Alert

DOL Issues New Overtime Regulations

On April 20, 2004, the U.S. Department of Labor ("DOL") issued its final regulations for the so-called white-collar exemptions under the Fair Labor Standards Act ("FLSA"). The DOL originally had issued proposed regulations in March 2003 and received over 75,000 comments from employers, employees, trade associations, labor unions, governmental entities and others. The final regulations will become effective 120 days after publication in the Federal Register.

The FLSA requires that most employees be paid at least the minimum wage and overtime pay at time and one-half the employee's regular rate of pay for all hours worked over 40 hours in a workweek. The FLSA does, however, provide an exemption from the minimum wage and overtime pay requirements for employees employed as bona fide executive, administrative, professional and outside sales employees, as well as certain computer employees. To qualify for these "white-collar" exemptions, employees generally must meet certain tests regarding their job duties and be paid on a salary basis at not less than $455 per week (or $23,660 per year). Job titles do not determine exempt status.

Following is a brief synopsis of the regulations. Please note that the regulations are over 60 pages in length. Accordingly, the following is not intended as specific legal advice as to a particular circumstance or situation. If you have a question regarding application of the new regulations you should feel free to contact your WNJ attorney. Summary information and a copy of the regulations can be found on the DOL's Web site at

Executive Exemption

To qualify for the executive employee exemption, all of the following tests must be met:

  • The employee must be compensated on a salary basis (as defined in the regulations) at a rate not less than $455 per week;

  • The employee's primary duty must be managing the enterprise, or managing a customarily recognized department or subdivision of the enterprise;

  • The employee must customarily and regularly direct the work of at least two or more other full-time employees or their equivalent; and

  • The employee must have the authority to hire or fire other employees, or the employee's suggestions and recommendations as to the hiring, firing, advancement, promotion or any other change of status of other employees must be given "particular weight."

Administrative Exemption

To qualify for the administrative employee exemption, all of the following tests must be met:

  • The employee must be compensated on a salary or fee basis (as defined in the regulations) at a rate not less than $455 per week;

  • The employee's primary duty must be the performance of office or nonmanual work directly related to the management or general business operations of the employer or the employer's customers; and

  • The employee's primary duty includes the exercise of discretion and independent judgment with respect to "matters of significance."

Professional Exemption

To qualify for the learned professional employee exemption, all of the following tests must be met:

  • The employee must be compensated on a salary or fee basis (as defined in the regulations) at a rate not less than $455 per week;

  • 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 a field of science or learning; and

  • The advanced knowledge must be customarily acquired by a prolonged course of specialized intellectual instruction.

To qualify for the creative professional employee exemption, all of the following tests must be met:

  • The employee must be compensated on a salary or fee basis (as defined in the regulations) at a rate not less than $455 per week (or $23,660 per year);

  • The employee's primary duty must be the performance of work requiring invention, imagination, originality or talent in a recognized field of artistic or creative endeavor.

Computer Employee Exemption

To qualify for the computer employee exemption, the following tests must be met:

  • The employee must be compensated either on a salary or fee basis (as defined in the regulations) at a rate not less than $455 per week or, if compensated on an hourly basis, at a rate not less than $27.63 an hour;

  • The employee must be employed as a computer systems analyst, computer programmer, software engineer or other similarly skilled worker in the computer field performing the duties described below;

  • The employee's primary duty must consist of:
    1. The application of systems analysis techniques and procedures, including consulting with users, to determine hardware, software or system functional specifications;

    2. The design, development, documentation, analysis, creation, testing or modification of computer systems or programs, including prototypes, based on and related to user or system design specifications;

    3. The design, documentation, testing, creation or modification of computer programs related to machine operating systems; or

    4. A combination of the aforementioned duties, the performance of which requires the same level of skills.

Outside Sales Exemption

To qualify for the outside sales employee exemption, all of the following tests must be met:

  • The employee's primary duty must be making sales (as defined in the FLSA), or obtaining orders or contracts for services or for the use of facilities for which a consideration will be paid by the client or customer; and

  • The employee must be customarily and regularly engaged away from the employer's place or places of business.

Highly Compensated Employees

Highly compensated employees performing office or nonmanual work and paid total annual compensation of $100,000 or more (which must include at least $455 per week paid on a salary or fee basis) are exempt from the FLSA if they customarily and regularly perform at least one of the duties of an exempt executive, administrative or professional employee identified in the standard tests for exemption.

Blue-Collar Workers

The DOL was careful to point out that the exemptions apply only to "white-collar" employees who meet the salary and duties tests set forth in the regulations. The exemptions do not apply to manual laborers or other "blue-collar" workers who perform work involving repetitive operations with their hands, physical skill and energy. Nonmanagement employees in production, maintenance, construction and similar occupations such as carpenters, electricians, mechanics, plumbers, iron workers, craftsmen, operating engineers, longshoremen, construction workers and laborers are entitled to overtime premium pay and are not exempt under the regulations no matter how highly paid they might be.

Police, Firefighters, Paramedics & Other First Responders

The exemptions also do not apply to police officers, detectives, deputy sheriffs, state troopers, highway patrol officers, investigators, inspectors, correctional officers, parole or probation officers, park rangers, firefighters, paramedics, emergency medical technicians, ambulance personnel, rescue workers, hazardous materials workers and similar employees, regardless of rank or pay level, who perform work such as preventing, controlling or extinguishing fires of any type; rescuing fire, crime or accident victims; preventing or detecting crimes; conducting investigations or inspections for violations of law; performing surveillance; pursuing, restraining and apprehending suspects; detaining or supervising suspected and convicted criminals, including those on probation or parole; interviewing witnesses; interrogating and fingerprinting suspects; preparing investigative reports; or other similar work.

Salary Basis Requirement

To qualify for exemption, employees generally must be paid at not less than $455 per week on a salary basis. The salary requirements do not apply to outside sales employees, teachers, and employees practicing law or medicine. Exempt computer employees may be paid at least $455 on a salary basis or on an hourly basis at a rate not less than $27.63 an hour.

Being paid on a "salary basis" means an employee regularly receives a predetermined amount of compensation each pay period on a weekly, or less frequent, basis. The predetermined amount cannot be reduced because of variations in the quality or quantity of the employee's work. Subject to the exceptions listed below, an exempt employee must receive the full salary for any week in which the employee performs any work, regardless of the number of days or hours worked. Exempt employees do not need to be paid for any workweek in which they perform no work. If the employer makes deductions from an employee's predetermined salary, i.e., because of the operating requirements of the business, that employee is not paid on a "salary basis." If the employee is ready, willing and able to work, deductions may not be made for time when work is not available.

In addition to deductions for unpaid leave under the Family and Medical Leave Act ("FMLA"), deductions from an exempt employee's pay are permitted in certain situations:

  • When the employee is absent from work for personal reasons (other than sickness or accident) for one or more full days;

  • When the employee is absent from work for one or more full days due to sickness or disability if the deduction is made according to a bona fide plan, policy or practice of providing compensation for lost salary (e.g., disability or sick-pay plan, workers' compensation, etc.);

  • To offset amounts received for jury duty, witness fees, or military duty;

  • For penalties imposed in good faith for infractions of "safety rules of major significance";

  • For unpaid disciplinary suspensions of one or more full days imposed in good faith for infractions of written workplace conduct rules; or

  • Employers may prorate an employee's salary during the initial week of employment and the last week of employment.

Other Laws & Collective Bargaining Agreements

The FLSA provides minimum standards that may be exceeded, but cannot be waived or reduced. Employers must comply, for example, with any federal, state or municipal laws, regulations or ordinances establishing a higher minimum wage or lower maximum workweek than those established under the FLSA. Similarly, employers may, on their own initiative or under a collective bargaining agreement, provide a higher wage, shorter workweek, or higher overtime premium than provided under the FLSA. While collective bargaining agreements cannot waive or reduce FLSA protections, nothing in the FLSA or the regulations relieves employers from their contractual obligations under such bargaining agreements.

When the state laws differ from the FLSA, an employer must comply with the standard most protective to employees. Michigan's Minimum Wage Law, MCL 408.381 et seq., contains its own set of "white-collar" exemptions for executive, administrative and professional employees. While these Michigan exemptions are similar to the FLSA exemptions, they do differ in some respects. Thus, unless Michigan adopts the FLSA requirements, employers will need to evaluate their exempt positions against both the state and the federal standards and comply with the most protective one.

* * * *

Human Resources E-mail Alert is published by Warner Norcross & Judd to inform clients and friends of new developments. It is not intended as legal advice. If you need additional information on the topics in this issue, please contact your Warner Norcross attorney or any member of the Firm's Human Resources Law Group.

NOTICE. Although we would like to hear from you, we cannot represent you until we know that doing so will not create a conflict of interest. Also, we cannot treat unsolicited information as confidential. Accordingly, please do not send us any information about any matter that may involve you until you receive a written statement from us that we represent you.

By clicking the ‘ACCEPT’ button, you agree that we may review any information you transmit to us. You recognize that our review of your information, even if you submitted it in a good faith effort to retain us, and even if you consider it confidential, does not preclude us from representing another client directly adverse to you, even in a matter where that information could and will be used against you.

Please click the ‘ACCEPT’ button if you understand and accept the foregoing statement and wish to proceed.



+ -