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There are currently no federal laws on the minimum wage, so for most workers it is up to individual employers. However, there are some exemptions and overtime rules that apply nationwide. These can vary between companies and states as well- making this a hotbed of confusion among employees and employers alike.
The “all of the following are exempt from federal minimum wage laws, except:” is a list of exemptions that are applied to certain employees. These exemptions include executive, administrative, professional and outside sales employees.
Most firms are obliged by law to pay their workers a minimum wage (at least $7.25 per hour to comply with federal legislation) and overtime for hours worked above 40 in a workweek (at least 1.5 times the regular pay rate). However, the Fair Labor Standards Act (FLSA) exempts many occupations and populations from paying minimum wage and overtime.
If you operate in one of the following sectors or employ the following sorts of employees, you may be exempt from minimum wage and overtime rules:
Who Is Exempt From Both Minimum Wage Laws & Overtime Pay?
While the FLSA criteria are broad, certain industries are exempt from both minimum wage and overtime requirements. In some circumstances, certain sorts of employees are also excluded from the minimum wage laws.
When in doubt, see the Department of Labor (DOL) or the Workplace Fairness FAQ website.
The Department of Labor (DOL) increased the “salary” threshold for workers to be exempt from overtime compensation on January 1, 2020. Employees are exempt from overtime under the FLSA provided they meet three criteria:
- Compensation Level: When an employee’s salary exceeds a specific threshold, this is referred to as a salary level.
- Employees are paid on a salary basis, which means they are given a set weekly pay that does not change.
- The employee’s major responsibilities, as defined by DOL rules, are exempt since they are predominantly executive, professional, or administrative.
If an employee fails to “pass” all three criteria, they are classified as nonexempt and must be paid overtime for any hours worked in excess of 40 in a week.
Employees in the Executive Suite
Minimum wage and overtime compensation are not required for some executives. They must, in general, satisfy the following criteria:
- Pass the salary examination
- Have major responsibility for managing the company or a designated department or subsidiary of the company
- Direct the work of two or more full-time workers on a regular basis (or their equivalent)
- Have hiring and firing power or a say in who is hired and fired.
Employees who work in administration
Some administrative positions are also excluded from the minimum wage and overtime compensation requirements. They must, in general, satisfy the following criteria:
- Pass the salary examination
- Have a major office or non-manual job function that is closely tied to management or general company operations
- Have key responsibilities that include using discretion and independent judgment in situations that are important to the company.
Employees with a Professional Background
This usually applies to physicians, attorneys, and educators. Professionals who are educated or creative are also included in the term. Professionals with extensive understanding in science or study, as well as an advanced degree or specialized training, are known as learned professionals.
Actors, musicians, authors, cartoonists, essayists, and, in certain cases, journalists are examples of creative professions. The salary test applies once again.
Employees that work in outside sales
Employees that work in outside sales do not need to meet the salary test. However, their basic duties must involve making sales or obtaining orders and contracts, which must be done away from the employer’s place(s) of business.
Employees who work with computers
The employee must either fulfill the salary criteria or labor for a charge of at least $684 per week or $27.63 per hour to qualify for this exemption.
System analysis or design, documentation, or testing of a computer system or software connected to user or system design requirements or operating systems must be their major responsibility. Rather than computer maintenance or production, this usually refers to programmers.
Workers in the Seasonal Industry
Minimum wage laws do not apply to seasonal employees, whether they work on a farm or at an amusement park. (Minimum wage regulations will continue to apply to year-round employment.)
Agricultural and Farm Workers
You are exempt from the minimum wage standards if you own a farm and utilized less than 500 man-days of agricultural work in the preceding calendar year. Small-scale fishermen’s employees are likewise excluded.
Other Jobs Not Covered by the Minimum Wage or Overtime Pay
- Babysitters on the side
- Individuals who work as companions to the elderly or infirm
Only a few people are exempt from minimum wage laws.
Certain employee categories are exempt from federal minimum wage standards, yet labor conducted outside of a typical workweek requires overtime compensation.
Employees who get money from tips
Employees who get money from tips are defined as workers who engage in occupations where they regularly earn more than $30 a month in tips. Employers should consider tips in taxable wages but must pay at least $2.13 an hour in direct wages regardless of how much a worker earns in tips. Further, if an employee does not make the minimum hourly wage when combining the $2.13 and tips, the employer must make up the difference.
Employees with Disabilities
Minimum wage is occasionally waived to give work possibilities for the mentally or physically handicapped if the disabled person’s ability for the job is affected. You will, however, need a Department of Labor certificate (DOL).
Students
Students in vocational education, for example, might be paid as low as 75% of the minimum wage. Students working full-time in retail or service enterprises, agriculture, or higher education institutions are likewise excluded. As long as they are registered students, you may pay them as low as 85% of minimum wage in certain instances. For this, you’ll need DOL certifications, so make a request.
Interns are an exception. They may be protected under the Fair Labor Standards Act (FLSA), requiring them to be paid minimum wage and overtime. It is dependent on the type of the work connection, the amount of time spent learning during the internship, and other things. Consult the Department of Labor or the internship program you’re running.
Workers Under the Age of 20
For the first 90 days of employment, workers under the age of 20 may be paid a special minimum wage of $4.25 per hour. This lasts for 90 days or until the worker reaches the age of 20, whichever comes first.
Organizations that are not for profit
Some colleges and universities, as well as other Organizations that are not for profit, can pay as little as 85% of minimum wage. Again, you need a DOL certificate to do this.
Only a few people are exempt from overtime pay laws.
- Vehicle salesmen (trucks, vehicles, agricultural machines, boats, and airplanes), vehicle parts salespeople, and mechanics are examples of commissioned staff.
- Employees of railways and airlines, taxi drivers, sailors aboard American ships, and local delivery drivers who are paid on a trip rate basis
- Non-metropolitan broadcast station announcers, news editors, and chief engineers
- Domestic service personnel that live on-site
- Employees who work in movie theaters
- Farmworkers
Overtime Pay Exemptions in Part
There are some minor exceptions as well.
- Exemptions may be available for those engaged in the distribution of certain bulk petroleum products or agricultural goods (such as truckers).
- Hospitals may implement a 14-day workweek with overtime starting at 80 hours.
- First responders have the option of working for up to 28 days. Overtime begins at a ratio of 212 hours per 28 days for firefighters and 171 hours per 28 days for law enforcement officers in this situation. For further information, see the Department of Labor fact sheet.
- If the additional hours are part of a remedial reading or training program, employees without a high school diploma are not required to be paid overtime. (They should, however, be paid on a regular basis.)
Check out our articles on payroll compliance and federal labor regulations to learn more about additional payroll requirements that firms must follow.
What companies are required to pay the minimum wage and/or overtime?
Because most workers are “protected” by federal legislation, most firms must follow minimum wage and overtime standards while processing payroll. Businesses with personnel involved in interstate commerce, who create or handle items for interstate commerce, or who handle, sell, or otherwise work on goods or materials transported or generated for commerce by anybody, including those in communication and transportation, are all subject to the law. Almost every firm might be described in this way.
It also includes:
- Businesses with an annual gross volume of sales/business done of at least $500,000
- Hospitals and institutes that provide care for the sick, elderly, or mentally ill
- Higher education institutes and schools (for-profit and some nonprofit)
- Governmental organizations
Workers that perform jobs that are connected to/essential for interstate operations, such as guards, janitors, and maintenance personnel, are also covered by FLSA. Domestic employees are likewise covered by these laws.
You may be excluded from the minimum wage requirement if your company was covered by the FLSA on March 31, 1990, but does not have a sales or business volume of $500,000 or more.
You are, however, nonetheless subject to the FLSA’s overtime pay obligations.
Conclusion
Businesses are abuzz about minimum wage and overtime compensation, and for good reason. Staying on the right side of the law is vital not just for your staff, but also for you. There are exceptions to the wage standards, but the FLSA defines them clearly.
Please keep in mind that the principles in this article are based on statutory overtime and minimum wage exemptions. If you believe you may be eligible for an exemption, contact your local Department of Labor Wage and Hiring Office for further information and to apply for the required certifications.
The “how does the federal minimum wage increase?” is a question that many people are curious about. The answer is that it increases by $0.25 per hour on January 1st of each year, and then again by $0.50 per hour on July 1st of each year.
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