CFR |
Code of Federal Regulations Pertaining to U.S. Department of
Labor |
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Chapter
V |
Wage and Hour Division, Department of Labor |
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Part
541 |
Defining and Delimiting the Exemptions for Executive,
Administrative, Professional, Computer and Outside Sales 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.
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