DOL Offers Insight on Highly Compensated Employee Exemption

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An opinion letter from the U.S. Department of Labor, FLSA2020-13, provided some illumination on certain aspects of the highly compensated employee (HCE) exemption to the requirement under the Fair Labor Standards Act to pay overtime for all hours worked over 40 in a workweek.

Although this letter responds to a particular inquiry, it may be relied on by other employers for general applicable principles under the HCE exemption. This exemption applies to an employee who regularly performs at least one exempt administrative, executive or professional duty, and receives a total annual compensation of at least $107,432 that is paid at a rate of at least $684 a week on a salary basis (meaning that they receive a predetermined amount that is all or part of the employee’s compensation on a weekly or less frequent basis that is not reduced based on the quantity or quality of work performed). Beyond the specific application to the employer’s corporate trainers (who were found to perform professional duties), the DOL also made the following assertions:

  • Employees paid a daily rate do not meet the salary basis test for purposes of the HCE exemption.
  • Exempt employees, including HCEs, may receive additional compensation on a commission, bonus, flat, straight-time, or other basis without losing the exemption.
  • The minimum weekly and annual salary requirements do not vary based on a part-time or full-time basis. Thus, proportional payments to part-time employees do not satisfy the HCE test.