In order for an employee to be exempt from overtime and minimum wage protections of the FLSA under the highly compensated employee exemption, the following criteria must be proven by the employer:

  • The employee must earn total annual compensation of $100,000 or more, which includes at least $455 per week paid on a salary basis;
  • The employee’s primary job duties include office or non-manual work; and
  • The employee must customarily and regularly perform any one or more of the job duties under the executive, administrative or professional exemptions.

Example 1:

An employee manages three other employees in his/her employer’s offices, but does not have authority to hire and fire them, or make recommendations on hiring and firing them. That employee works 52 weeks in a year and is paid a salary of $1,000 per week totaling $52,000 and also receives annual bonus pay totaling $49,000 for that same year. That employee is exempt under the highly paid individual employee exemption because he/she earns total pay of $100,000 or more per year, is paid a guaranteed weekly salary that exceeds the $455 FLSA salary requirement, and has one, although not all, of the job duties required for the executive exemption (managing two or more employees).

Example 2:

An employee works at drilling rig locations testing the air for dangerous gases by setting up, calibrating, and monitoring testing equipment. That employee is paid a day rate of $500 per day, and works five days per week for 50 weeks in a year, thus earning $125,000 in annual pay. The employee is still due overtime pay under the FLSA because he is not a highly compensated exempt employee due to both not being paid a guaranteed salary of at least $455 per week in addition to performing non-office and manual type work.

The employee must have total annual compensation of $100,000 or more. However, all or part of that compensation must include a guaranteed salary of no less than $455 per week. So, for example, an employee paid on a day rate basis only of $400 per day who makes $117,000 per year DOES NOT qualify for the highly compensated employee exemption because a portion of that pay does not include a guaranteed weekly salary of $455 or more.

It is critical to note that the highly compensated employee exemption DOES NOT apply to workers providing manual labor. As the regulation states, the highly compensated employee exemption:

Applies only to employees whose primary duty includes performing office or non-manual work. Thus, for example, non-management production-line workers and non-management employees in maintenance, construction and similar occupations such as carpenters, electricians, mechanics, plumbers, iron workers, craftsmen, operating engineers, longshoremen, construction workers, laborers and other employees who perform work involving repetitive operations with their hands, physical skill and energy are not exempt under this section no matter how highly paid they might be.

Also, it is important to know that the highly compensated employee exemption DOES NOT apply to employees who are not paid a weekly salary of at least $455 as a part of their total annual pay. So, if an employee is paid $150,000 per year on a commission only, day rate only, or hourly only basis, that employee is not exempt from the FLSA’s protections.