Content Last Revised: 4/23/04 ---DISCLAIMER---

29CFR541.601 - Highly compensated employees.

• Section Number: 541.601
• Section Name: Highly compensated employees.

    (a) An employee with total annual compensation of at least $100,000 
is deemed exempt under section 13(a)(1) of the Act if the employee 
customarily and regularly performs any one or more of the exempt duties 
or responsibilities of an executive, administrative or professional 
employee identified in subparts B, C or D of this part.
    (b) (1) ``Total annual compensation'' must include at least $455 
per week paid on a salary or fee basis. Total annual compensation may 
also include commissions, nondiscretionary bonuses and other 
nondiscretionary compensation earned during a 52-week period. Total 
annual compensation does not include board, lodging and other 
facilities as defined in Sec.  541.606, and does not include payments 
for medical insurance, payments for life insurance, contributions to 
retirement plans and the cost of other fringe benefits.
    (2) If an employee's total annual compensation does not total at 
least the minimum amount established in paragraph (a) of this section 
by the last pay period of the 52-week period, the employer may, during 
the last pay period or within one month after the end of the 52-week 
period, make one final payment sufficient to achieve the required 
level. For example, an employee may earn $80,000 in base salary, and 
the employer may anticipate based upon past sales that the employee 
also will earn $20,000 in commissions. However, due to poor sales in 
the final quarter of the year, the employee actually only earns $10,000 
in commissions. In this situation, the employer may within one month 
after the end of the year make a payment of at least $10,000 to the 
employee. Any such final payment made after the end of the 52-week 
period may count only toward the prior year's total annual compensation 
and not toward the total annual compensation in the year it was paid. 
If the employer fails to make such a payment, the employee does not 
qualify as a highly compensated employee, but may still qualify as 
exempt under subparts B, C or D of this part.
    (3) An employee who does not work a full year for the employer, 
either because the employee is newly hired after the beginning of the 
year or ends the employment before the end of the year, may qualify for 
exemption under this section if the employee receives a pro rata 
portion of the minimum amount established in paragraph (a) of this 
section, based upon the number of weeks that the employee will be or 
has been employed. An employer may make one final payment as under 
paragraph (b)(2) of this section within one month after the end of 
employment.
    (4) The employer may utilize any 52-week period as the year, such 
as a calendar year, a fiscal year, or an anniversary of hire year. If 
the employer does not identify some other year period in advance, the 
calendar year will apply.
    (c) A high level of compensation is a strong indicator of an 
employee's exempt status, thus eliminating the need for a detailed 
analysis of the employee's job duties. Thus, a highly compensated 
employee will qualify for exemption if the employee customarily and 
regularly performs any one or more of the exempt duties or 
responsibilities of an executive, administrative or professional 
employee identified in subparts B, C or D of this part. An employee may 
qualify as a highly compensated executive employee, for example, if the 
employee customarily and regularly directs the work of two or more 
other employees, even though the employee does not meet all of the 
other requirements for the executive exemption under Sec.  541.100.
    (d) This section 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.