Pastor, Church & Law

Exemptions

§ 08.08.05

Key Point 8-08.05. The Fair Labor Standards Act exempts employees employed in an executive, administrative, or professional capacity from the minimum wage and overtime pay provisions. To be covered by one of these exemptions, an employee must perform specified duties, and be paid a salary in excess of a specified amount.

The FLSA requires covered employers to pay their employees at least the federal minimum wage, and overtime premium pay of one and a half times the regular rate of pay for all hours worked over 40 hours in a workweek. However, the FLSA includes a number of exemptions from the minimum wage and overtime requirements, including “any employee employed in a bona fide executive, administrative, or professional capacity … as such terms are defined from time to time by [Department of Labor] regulations.”

These exemptions are summarized below.

Key point. One of the requirements for exemption as an executive, administrative, or professional employee is compensation paid on a salary basis of not less than a specified amount. At the time of publication, that amount was $455 per week. However, the United States Department of Labor is in the process of revising the regulations located at 29 C.F.R. part 541, which govern the exemption of executive, administrative, and professional employees from the Fair Labor Standards Act’s minimum wage and overtime pay requirements. Until the Department issues its final rule, it will enforce the part 541 regulations in effect on November 30, 2016, including the $455 per week standard salary level. These regulations are available at: https://www.dol.gov/agencies/whd/overtime/2019/index. Church leaders are advised to monitor developments to insure compliance.

A. Executive employees

DOL regulations ⁴⁶define an exempt “executive” employee as any employee who is:

(1) compensated on a salary basis at a rate of not less than $455 per week ($23,660 per year);

(2) whose primary duty is management of the enterprise in which the employee is employed or of a customarily recognized department or subdivision thereof;

(3) who customarily and regularly directs the work of two or more other employees; and

(4) who has the authority to hire or fire other employees or whose suggestions and recommendations as to the hiring, firing, advancement, promotion or any other change of status of other employees are given particular weight.

This definition includes the following key terms that are more fully defined by the regulations, as noted in the following paragraphs:

salary basis (including board and lodging provided by the employer)
primary duty
management
customarily and regularly
two or more employees
particular weight” target=”_blank”> salary basis (including board and lodging provided by the employer)
primary duty
management
customarily and regularly
two or more employees
particular weight

“salary basis”

Exempt employees (not covered by the minimum wage and overtime pay rules) must be paid on a “salary basis” of at least $455 per week. Being paid on a “salary basis” means an employee regularly receives a predetermined amount of compensation each pay period on a weekly, or less frequent, basis. The predetermined amount cannot be reduced because of variations in the quality or quantity of the employee’s work. Subject to exceptions noted below, exempt employees must receive the full salary for any week in which they perform any work, regardless of the number of days or hours worked.

Deductions from pay are permissible when an exempt employee

is absent from work for one or more full days for personal reasons other than sickness or disability
for absences of one or more full days due to sickness or disability if the deduction is made in accordance with a bona fide policy of providing compensation for salary lost due to illness
to offset amounts employees receive as jury or witness fees, or for military pay
for penalties imposed in good faith for infractions of safety rules of major significance
for unpaid disciplinary suspensions of one or more full days imposed in good faith for workplace conduct rule infractions

Also, an employer is not required to pay the full salary in the initial or terminal week of employment, or for weeks in which an exempt employee takes unpaid leave under the Family and Medical Leave Act.

An employer will lose the exemption if it has an “actual practice” of making improper deductions from salary. The exemption is lost during the time period in which the improper deductions were made for employees in the same job classification working for the same managers responsible for the actual improper deductions. Employees in different job classifications or who work for different managers do not lose their status as exempt employees. Factors to consider when determining whether an employer has an actual practice of making improper deductions include, but are not limited to:

the number of improper deductions, particularly as compared to the number of employee infractions warranting deductions
the time period during which the employer made improper deductions
the number and geographic location of both the employees whose salary was improperly reduced and the managers responsible
whether the employer has a clearly communicated policy permitting or prohibiting improper deductions
Isolated or inadvertent improper deductions will not result in loss of the exemption if the employer reimburses the employee for the improper deductions.

If an employer (1) has a clearly communicated policy prohibiting improper deductions and including a complaint mechanism, (2) reimburses employees for any improper deductions, and (3) makes a good faith commitment to comply in the future, the employer will not lose the exemption for any employees unless the employer willfully violates the policy by continuing the improper deductions after receiving employee complaints.

Key Point. Administrative, professional and computer employees may be paid on a “fee basis” rather than on a salary basis. If the employee is paid an agreed sum for a single job, regardless of the time required for its completion, the employee will be considered to be paid on a “fee basis.” A fee payment is generally paid for a unique job, rather than for a series of jobs repeated a number of times and for which identical payments repeatedly are made. To determine whether the fee payment meets the minimum salary level requirement, the test is to consider the time worked on the job and determine whether the payment is at a rate that would amount to at least $455 per week if the employee worked 40 hours. For example, a person paid $250 for a project that took 20 hours to complete meets the minimum salary requirement since the rate would yield $500 if 40 hours were worked.

Key Point. A church cannot make a nonexempt employee exempt by paying him or her a salary.

board and lodging

The final regulations specify that an exempt employee must earn the minimum salary amount ($455 per week) “exclusive of board, lodging or other facilities.” The regulations state that “the costs incurred by an employer to provide an employee with board, lodging or other facilities may not count towards the minimum salary amount required for exemption. Such separate transactions are not prohibited between employers and their exempt employees, but the costs to employers associated with such transactions may not be considered when determining if an employee has received the full required minimum salary payment.”

The final regulations define the term “other facilities” to include items similar to board and lodging, such as meals furnished by the employer; housing furnished for dwelling purposes; and transportation furnished to employees for ordinary commuting between their homes and work.

Case studies

A church owns a parsonage that in the past was used as the residence for the church’s senior pastor. When the senior pastor purchased a home a few years ago, the church allowed a non minister employee to reside in the parsonage. The annual rental value of the parsonage is $12,000. This amount is not considered in deciding if the employee is paid on a salary basis of at least $455 per week ($23,660 per year).
A youth pastor is paid an annual salary of $20,000 by his church. In addition, he is permitted to live in a church owned parsonage. The parsonage has an annual rental value of $15,000. This amount is not considered in deciding if the youth pastor is paid on a salary basis of at least $455 per week ($23,660 per year).
A youth pastor is paid an annual salary of $20,000, and in addition is paid an annual housing allowance of $12,000 that he uses to rent a home for his family. Is a housing allowance considered in deciding if the youth pastor is paid on a salary basis of at least $455 per week ($23,660 per year)? The final regulations do not address this issue directly, but they do state that the value of “board” and “housing furnished for dwelling purposes” are not included. These terms may be interpreted broadly to include compensation that is provided to a minister to provide housing in lieu of a parsonage, meaning that the youth pastor in this example would not meet the $23,660 threshold for exempt status. This conclusion seems to be consistent with the purpose of the law to make the minimum wage and overtime pay protections of the Fair Labor Standards Act available to as many employees as possible. Note two additional considerations. First, the final regulations specify that “there are some workers, such as … clergy, who are statutorily exempt or whose exempt status is not affected by the increased salary requirement in the final rule,” and that “clergy and religious workers are not covered by the FLSA.” This language indicates that the position of the DOL is that clergy are not subject to the minimum wage and overtime pay requirements of the FLSA no matter how little they earn. Second, as noted in Section 8-08.7, two federal appeals courts have ruled that the so called “ministerial exception” prohibits the DOL from applying the FLSA to ministers.
A church allows a staff member to commute between her home and the church in a church owned vehicle. The value of this benefit is not considered in deciding if the employee is paid on a salary basis of at least $455 per week ($23,660 per year).

“primary duty”

The final regulations define “primary duty” to mean the principal, main, major or most important duty that the employee performs. Determination of an employee’s primary duty must be based on all the facts in a particular case, with the major emphasis on the character of the employee’s job as a whole.

“management”

The final regulations clarify that “management” includes, but is not limited to, activities such as

interviewing, selecting, and training of employees
setting and adjusting their rates of pay and hours of work
directing the work of employees
maintaining production or sales records for use in supervision or control
appraising employees’ productivity and efficiency for the purpose of recommending promotions or other changes in status
handling employee complaints and grievances
disciplining employees
planning the work
determining the techniques to be used
apportioning the work among the employees
determining the type of materials, supplies, machinery, equipment or tools to be used or merchandise to be bought, stocked and sold
controlling the flow and distribution of materials or merchandise and supplies
providing for the safety and security of the employees or the property
planning and controlling the budget
monitoring or implementing legal compliance measure.

“customarily and regularly”

The phrase “customarily and regularly” means greater than occasional but less than constant; it includes work normally done every workweek, but does not include isolated or one time tasks.

“two or more employees”

The phrase “two or more other employees” means two full-time employees or their equivalent. For example, one full-time and two half-time employees are equivalent to two full-time employees. The supervision can be distributed among two, three or more employees, but each such employee must customarily and regularly direct the work of two or more other full-time employees or the equivalent. For example, a department with five full-time nonexempt workers may have up to two exempt supervisors if each supervisor directs the work of two of those workers.

“particular weight”

Factors to be considered in determining whether an employee’s recommendations as to hiring, firing, advancement, promotion or any other change of status are given “particular weight” include, but are not limited to, whether it is part of the employee’s job duties to make such recommendations, and the frequency with which such recommendations are made, requested, and relied upon. Generally, an executive’s recommendations must pertain to employees whom the executive customarily and regularly directs. It does not include occasional suggestions. An employee’s recommendations may still be deemed to have “particular weight” even if a higher level manager’s recommendation has more importance and even if the employee does not have authority to make the ultimate decision as to the employee’s change in status.

B. Administrative employees

Key point. One of the requirements for exemption as an executive, administrative, or professional employee is compensation paid on a salary basis of not less than a specified amount. At the time of publication, that amount was $455 per week. However, the United States Department of Labor is in the process of revising the regulations located at 29 C.F.R. part 541, which govern the exemption of executive, administrative, and professional employees from the Fair Labor Standards Act’s minimum wage and overtime pay requirements. Until the Department issues its final rule, it will enforce the part 541 regulations in effect on November 30, 2016, including the $455 per week standard salary level. These regulations are available at: https://www.dol.gov/agencies/whd/overtime/2019/index. Church leaders are advised to monitor developments to insure compliance.

The DOL regulations ⁴⁷define an exempt “administrative” employee as any employee who is:

(1) compensated on a salary or fee basis at a rate of not less than $455 per week ($23,660 per year), exclusive of board, lodging or other facilities;

(2) whose primary duty is the performance of office or non manual work directly related to the management or general business operations of the employer or the employer’s customers; and

(3) whose primary duty includes the exercise of discretion and independent judgment with respect to matters of significance.

Note that the final regulations eliminated the “position of responsibility” test contained in the 2003 proposed regulations. The DOL concluded (after reviewing thousands of public comments) that the “position of responsibility” standard “does little to bring clarity and certainty to the administrative exemption.” As a result, the “position of responsibility” requirement and its definition as “work of substantial importance” or “work requiring a high level of skill or training” were deleted. Instead, the final regulations require that exempt administrative employees exercise “discretion and independent judgment with respect to matters of significance.” The final regulations contain two independent, yet related, requirements for the administrative exemption. First, the employee must have a primary duty of performing office or non manual work “directly related to management or general business operations.” This requirement refers to the type of work performed by the employee. Second, the employee’s primary duty must include “the exercise of discretion and independent judgment with respect to matters of significance.”

This definition includes several key terms that are more fully defined by the regulations. The terms “salary basis” and “primary duty” are fully explained in the discussion of exempt “executive” employees (see above). Those definitions apply equally to administrative employees. Other key terms include:

directly related to management and general business operations
employer’s customers
discretion and independent judgment
matters of significance
“directly related to management or general business operations”

To meet the “directly related to management or general business operations” requirement, an employee must perform work directly related to assisting with the running or servicing of the business. Work “directly related to management or general business operations” includes, but is not limited to, work in functional areas such as

tax
finance
accounting
budgeting
auditing
insurance
quality control
purchasing
procurement
advertising
marketing
research
safety and health
personnel management
human resources
employee benefits
labor relations
public relations
government relations
computer network, Internet and database administration
legal and regulatory compliance

Many of these functions have no direct application to church employees, but they provide an excellent overview of the level of activity required to be “directly related to management or general business operations.” The final regulations provide the following additional information that will be useful in evaluating whether church staff positions qualify for the “administrative employee” exemption:

An employee who leads a team of other employees assigned to complete major projects for the employer (such as purchasing, selling or closing all or part of the business, negotiating a real estate transaction or a collective bargaining agreement, or designing and implementing productivity improvements) generally meets the duties requirements for the administrative exemption, even if the employee does not have direct supervisory responsibility over the other employees on the team.

An executive assistant or administrative assistant to a business owner or senior executive of a large business generally meets the duties requirements for the administrative exemption if such employee, without specific instructions or prescribed procedures, has been delegated authority regarding matters of significance.

Human resources managers who formulate, interpret or implement employment policies and management consultants who study the operations of a business and propose changes in organization generally meet the duties requirements for the administrative exemption. However, personnel clerks who “screen” applicants to obtain data regarding their minimum qualifications and fitness for employment generally do not meet the duties requirements for the administrative exemption. Such personnel clerks typically will reject all applicants who do not meet minimum standards for the particular job or for employment by the company. The minimum standards are usually set by the exempt human resources manager or other company officials, and the decision to hire from the group of qualified applicants who do meet the minimum standards is similarly made by the exempt human resources manager or other company officials. Thus, when the interviewing and screening functions are performed by the human resources manager or personnel manager who makes the hiring decision or makes recommendations for hiring from the pool of qualified applicants, such duties constitute exempt work, even though routine, because this work is directly and closely related to the employee’s exempt functions.

“employer’s customers”

An employee may qualify for the administrative exemption if the employee’s primary duty is the performance of work directly related to the management or general business operations of the employer’s customers. As a result, employees acting as advisors or consultants to their employer’s clients or customers may be exempt.

“discretion and independent judgment”

In general, the exercise of discretion and independent judgment involves the comparison and the evaluation of possible courses of conduct and acting or making a decision after the various possibilities have been considered. The term must be applied in the light of all the facts involved in the employee’s particular employment situation, and implies that the employee has authority to make an independent choice, free from immediate direction or supervision. Factors to consider include, but are not limited to:

whether the employee has authority to formulate, affect, interpret, or implement management policies or operating practices
whether the employee carries out major assignments in conducting the operations of the business
whether the employee performs work that affects business operations to a substantial degree
whether the employee has authority to commit the employer in matters that have significant financial impact
whether the employee has authority to waive or deviate from established policies and procedures without prior approval

The fact that an employee’s decisions are revised or reversed after review does not mean that the employee is not exercising discretion and independent judgment. The exercise of discretion and independent judgment must be more than the use of skill in applying well established techniques, procedures or specific standards described in manuals or other sources.

The regulations provide the following additional clarification:

The exercise of discretion and independent judgment must be more than the use of skill in applying well established techniques, procedures or specific standards described in manuals or other sources. The exercise of discretion and independent judgment also does not include clerical or secretarial work, recording or tabulating data, or performing other mechanical, repetitive, recurrent or routine work. An employee who simply tabulates data is not exempt, even if labeled as a “statistician.”⁴⁸

“matters of significance”

The term “matters of significance” refers to the level of importance or consequence of the work performed. An employee does not exercise discretion and independent judgment with respect to matters of significance merely because the employer will experience financial losses if the employee fails to perform the job properly. Similarly, an employee who operates very expensive equipment does not exercise discretion and independent judgment with respect to matters of significance merely because improper performance of the employee’s duties may cause serious financial loss to the employer.

Case Studies

A church wants to avoid the FLSA overtime pay requirements for its custodian (who often works more than 40 hours per week) and so it pays her an annual salary of $15,000 instead of an hourly wage. This common technique will not work under either prior law or the final regulations that took effect in August 2004. First, the custodian receives a salary of less than $23,660 per year. With few exceptions, no employee who is paid a salary of less than $23,660 can be treated as exempt from the FLSA overtime pay requirement. Second, the custodian does not meet the current definition of an exempt “administrative” employee since her primary duty is not the performance of office or non manual work related to the management or general business operations of the employer and her primary duty does not include the exercise of discretion and independent judgment with respect to matters of significance. The final regulations state: “The exercise of discretion and independent judgment must be more than the use of skill in applying well established techniques, procedures or specific standards described in manuals or other sources. The exercise of discretion and independent judgment also does not include clerical or secretarial work, recording or tabulating data, or performing other mechanical, repetitive, recurrent or routine work. An employee who simply tabulates data is not exempt, even if labeled as a “statistician.”
Same facts as the previous case study, except that the church increases the custodian’s salary to $25,000 in order to avoid the overtime pay requirement. This will not work. While the salary test is met, the custodian still does not meet the “duties” requirement summarized in the previous case study.
A church treasurer has heard about the new DOL definitions of exempt “administrative” employees. He would like the church secretary to be an exempt employee because she works so many hours of over time. He tells the senior pastor that if the secretary is paid a salary of at least $23,660, then the church can treat the secretary as an exempt administrative employee and avoid having to pay overtime. This advice is probably incorrect. It is possible in some cases that a secretary will meet the new definition of an administrative employee, or even an executive employee, but this will not be true in most cases. The final regulations specify that an administrative employee is one whose primary duty is performing “office or non manual work directly related to the management or general business operations of the employer or the employer’s customers,” and whose primary duty includes the exercise of discretion and independent judgment with respect to matters of significance. The final regulations state: “The exercise of discretion and independent judgment must be more than the use of skill in applying well established techniques, procedures or specific standards described in manuals or other sources. The exercise of discretion and independent judgment also does not include clerical or secretarial work, recording or tabulating data, or performing other mechanical, repetitive, recurrent or routine work. An employee who simply tabulates data is not exempt, even if labeled as a “statistician.” Most secretaries will not meet this test and so they would be nonexempt workers under the new rules. This means that they are legally entitled to overtime pay for all hours worked in excess of 40 during the same week.
The senior pastor of a large church has an administrative assistant who without instructions or prescribed procedures has been delegated the authority to arrange meetings, handle callers, and answer correspondence. The assistant is paid an annual salary of $30,000. The assistant would qualify as an exempt administrative employee under the new regulations. The regulations give the following case of an exempt administrative employee: “An executive or administrative assistant to a chief executive of a business if such employee, without specific instructions or prescribed procedures, has been delegated authority to arrange meetings, handle callers and answer correspondence.”

“educational establishments and administrative functions”

The administrative exemption is also available to employees compensated on a salary or fee basis at a rate not less than $455 a week and whose primary duty is performing administrative functions directly related to academic instruction or training in an educational establishment. Academic administrative functions include operations directly in the field of education, and do not include jobs relating to areas outside the educational field. Employees engaged in academic administrative functions include:

the superintendent or other head of an elementary or secondary school system, and any assistants responsible for administration of such matters as curriculum, quality and methods of instructing, measuring and testing the learning potential and achievement of students, establishing and maintaining academic and grading standards, and other aspects of the teaching program
the principal and any vice principals responsible for the operation of an elementary or secondary school department heads in institutions of higher education responsible for the various subject matter departments
academic counselors and other employees with similar responsibilities

The term “educational establishment” means an elementary or secondary school system, an institution of higher education or other educational institution. The FLSA defines elementary and secondary schools as those day or residential schools that provide elementary or secondary education, as determined under state law. Under the laws of most states, such education includes the curriculums in grades 1 through 12; under many it includes also the introductory programs in kindergarten. Such education in some states may also include nursery school programs in elementary education. Factors relevant in determining whether postsecondary career programs are educational institutions include whether the school is licensed by a state agency responsible for the state’s educational system or accredited by a nationally recognized accrediting organization for career schools. Also, for purposes of the exemption, no distinction is drawn between public and private schools, or between those operated for profit and those that are not for profit.

Case studies

A church wants to avoid the FLSA overtime pay requirements for its custodian (who often works more than 40 hours per week) and so it pays her an annual salary of $15,000 instead of an hourly wage. This common technique will not work under either the current or former definitions of “exempt employee,” for two reasons. First, the custodian earns less than $23,660 per year; and second, the custodian does not satisfy the new “duties” test since her primary duty is not the performance of office or non manual work directly related to the management or general business operations of the employer or the employer’s customers, and her primary duty does not include the exercise of discretion and independent judgment with respect to matters of significance.
Same facts as the previous case study, except that the church increases the custodian’s salary to $25,000 in order to avoid the overtime pay requirement. This will not work. While the salary test is met, the custodian still does not meet the “duties” requirement summarized in the previous example.
The senior pastor of a large church has an administrative assistant who without instructions or prescribed procedures has been delegated the authority to arrange meetings, handle callers, and answer correspondence. The assistant is paid an annual salary of $30,000. The assistant would qualify as an exempt administrative employee under the final regulations. The regulations give the following example of an exempt administrative employee: “An executive or administrative assistant to a chief executive of a business if such employee, without specific instructions or prescribed procedures, has been delegated authority to arrange meetings, handle callers and answer correspondence.”

C. Professional employees

Key point. One of the requirements for exemption as an executive, administrative, or professional employee is compensation paid on a salary basis of not less than a specified amount. At the time of publication, that amount was $455 per week. However, the United States Department of Labor is in the process of revising the regulations located at 29 C.F.R. part 541, which govern the exemption of executive, administrative, and professional employees from the Fair Labor Standards Act’s minimum wage and overtime pay requirements. Until the Department issues its final rule, it will enforce the part 541 regulations in effect on November 30, 2016, including the $455 per week standard salary level. These regulations are available at: https://www.dol.gov/agencies/whd/overtime/2019/index. Church leaders are advised to monitor developments to insure compliance.

DOL regulations ⁴⁹define an exempt “professional” employee as follows:

(1) an employee who is compensated on a salary or fee basis at a rate of not less than $455 per week ($23,660 per year), exclusive of board, lodging or other facilities;

(2) whose primary duty must be the performance of work requiring advanced knowledge, defined as work which is predominantly intellectual in character and which includes work requiring the consistent exercise of discretion and judgment;

(3) the advanced knowledge must be in a field of science or learning; and

(4) the advanced knowledge must be customarily acquired by a prolonged course of specialized intellectual instruction.

work requiring advanced knowledge
field of science or learning
customarily acquired by a prolonged course of specialized intellectual instruction

work requiring advanced knowledge

“Work requiring advanced knowledge” means work which is predominantly intellectual in character, and which includes work requiring the consistent exercise of discretion and judgment. Professional work is therefore distinguished from work involving routine mental, manual, mechanical or physical work. A professional employee generally uses the advanced knowledge to analyze, interpret or make deductions from varying facts or circumstances. Advanced knowledge cannot be attained at the high school level.

field of science or learning

Fields of science or learning include law, medicine, theology, accounting, actuarial computation, engineering, architecture, teaching, various types of physical, chemical and biological sciences, pharmacy and other occupations that have a recognized professional status and are distinguishable from the mechanical arts or skilled trades where the knowledge could be of a fairly advanced type, but is not in a field of science or learning.

customarily acquired by a prolonged course of specialized intellectual instruction

The learned professional exemption is restricted to professions where specialized academic training is a standard prerequisite for entrance into the profession. The best evidence of meeting this requirement is having the appropriate academic degree. However, the word “customarily” means the exemption may be available to employees in such professions who have substantially the same knowledge level and perform substantially the same work as the degreed employees, but who attained the advanced knowledge through a combination of work experience and intellectual instruction.

Key Point. This exemption does not apply to occupations in which most employees acquire their skill by experience rather than by advanced specialized intellectual instruction.

computer employees

Computer systems analysts, computer programmers, software engineers or other similarly skilled workers in the computer field are eligible for exemption as professionals. Employees who qualify for this exemption are highly skilled in computer systems analysis, programming, software engineering or similar computer functions. Because job titles vary widely and change quickly in the computer industry, job titles do not determine the applicability of this exemption. To qualify for the computer occupations exemption, the following tests must be met:

(1) the employee must be compensated either on a salary or fee basis at a rate not less than $455 per week or, if compensated on an hourly basis, at a rate not less than $27.63 an hour;

(2) the employee must be employed as a computer systems analyst, computer programmer, software engineer or other similarly skilled worker in the computer field performing the duties described below;

(3) the employee’s primary duty must consist of: (1) the application of systems analysis techniques and procedures, including consulting with users, to determine hardware, software or system functional specifications; (2) the design, development, documentation, analysis, creation, testing or modification of computer systems or programs, including prototypes, based on and related to user or system design specifications; (3) the design, documentation, testing, creation or modification of computer programs related to machine operating systems; or (4) a combination of the aforementioned duties, the performance of which requires the same level of skills.

The computer employee exemption does not include employees engaged in the manufacture or repair of computer hardware and related equipment. Employees whose work is highly dependent upon, or facilitated by, the use of computers and computer software programs (e.g., engineers, drafters and others skilled in computer aided design software), but who are not primarily engaged in computer systems analysis and programming or other similarly skilled computerrelated occupations identified in the primary duties test described above, are also not exempt under the computer employee exemption.

creative professionals

The regulations create an exemption for “creative professionals” if the following conditions are met:

the employee must be compensated on a salary or fee basis at a rate not less than $455 per week;
the employee’s primary duty must be the performance of work requiring invention, imagination, originality or talent in a recognized field of artistic or creative endeavor.

This definition includes a few key terms that are more fully defined by the regulations. The terms “salary basis” and “primary duty” are fully explained in the discussion of exempt “executive” employees (see above). Those definitions apply equally to creative professional employees. Other key terms include:

invention, imagination, originality or talent

This requirement distinguishes the creative professions from work that primarily depends on intelligence, diligence and accuracy. Exemption as a creative professional depends on the extent of the invention, imagination, originality or talent exercised by the employee. Whether the exemption applies, therefore, must be determined on a case by case basis. The requirements are generally met by actors, musicians, composers, soloists, certain painters, writers, cartoonists, essayists, novelists, and others as set forth in the regulations. Journalists may satisfy the duties requirements for the creative professional exemption if their primary duty is work requiring invention, imagination, originality or talent. Journalists are not exempt creative professionals if they only collect, organize and record information that is routine or already public, or if they do not contribute a unique interpretation or analysis to a news product.

recognized field of artistic or creative endeavor

This includes such fields as, for example, music, writing, acting and the graphic arts.

teachers

Teachers are exempt if their primary duty is teaching, tutoring, instructing or lecturing in the activity of imparting knowledge, and if they are employed and engaged in this activity as a teacher in an educational establishment. Exempt teachers include, but are not limited to, regular academic teachers; kindergarten or nursery school teachers; teachers of gifted or disabled children; teachers of skilled and semi skilled trades and occupations; and vocal or instrumental music teachers.

Key Point. The salary and salary basis requirements do not apply to bona fide teachers. They are considered professional employees regardless of the form or amount of compensation they are paid.

The final regulations state:

The possession of an elementary or secondary teacher’s certificate provides a clear means of identifying the individuals contemplated as being within the scope of the exemption for teaching professionals. Teachers who possess a teaching certificate qualify for the exemption regardless of the terminology (e.g., permanent, conditional, standard, provisional, temporary, emergency, or unlimited) used by the state to refer to different kinds of certificates. However, private schools and public schools are not uniform in requiring a certificate for employment as an elementary or secondary school teacher, and a teacher’s certificate is not generally necessary for employment in institutions of higher education or other educational establishments. Therefore, a teacher who is not certified may be considered for exemption, provided that such individual is employed as a teacher by the employing school or school system.⁵⁰

Case study. A church operated elementary and secondary school employs several full-time teachers. Some are state certified, but others are not. Most are paid an annual salary of less than $22,100. Are any of these teachers exempt employees under the proposed regulations? The answer is yes. The regulations provide that teachers are exempt whether or not they are state certified or licensed, and regardless of the amount of their salary.

highly compensated employees

Highly compensated employees performing office or non manual work and paid total annual compensation of $100,000 or more (which must include at least $455 per week paid on a salary or fee basis) are exempt from the FLSA if they customarily and regularly perform at least one of the duties of an exempt executive, administrative or professional employee identified in the standard tests for exemption.

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