"White Collar Exemptions" are exemptions under the The Fair Labor Standards Act (FLSA) that typically refer to people who work in offices or other professional environments.
The FLSA is a federal law requiring that most employees receive at least minimum wage for each hour worked and overtime pay for hours worked over 40 in a workweek. Some employees, however, are not entitled to overtime, while others are not entitled to overtime or minimum wage. Employees who are entitled to both minimum wage and overtime are called non-exempt, while those who are not entitled to both are called exempt. To maintain compliance with FLSA you need to know all of the exemptions.
The FLSA lists quite a few exemptions. The most commonly used (particularly in office settings) are the executive, administrative, and professional exemptions. These are known as white collar exemptions, and employees who are properly classified this way are not entitled to minimum wage or overtime. But, to qualify, each position must pass a three-part test:
- Duties: The employee must perform specific tasks (such as managing at least two people) and regularly use their independent judgment and discretion. Each exemption has its own duties test.
- Salary level: The employee must make at least $455 per week (equal to $23,600 per year).
- Salary basis: The employee must be paid the same each week regardless of hours worked or the quantity or quality of their work. Reducing an exempt employee’s pay is only allowed in very narrow circumstances.
If an employee meets all the criteria under one of the white collar exemptions, the employee may be properly classified as exempt and will not be entitled to minimum wage or overtime pay. If the employee does not meet all the criteria under a specific exemption, they must be classified as non-exempt, and paid at least minimum wage and overtime when applicable. Make sure you follow these rules when processing payroll.