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Friday,
April 23, 2004
Part II
Department of Labor
Wage and Hour Division
29 CFR Part 541
Defining and Delimiting the Exemptions
for Executive, Administrative,
Professional, Outside Sales and Computer
Employees; Final Rule
Regulations
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22260 Federal Register / Vol. 69, No. 79 / Friday, April 23, 2004 / Rules and Regulations
541.304 Practice of law or medicine. B; administrative employees, subpart C;
Subpart E—Computer Employees professional employees, subpart D;
541.400 General rule for computer computer employees, subpart E; outside
employees. sales employees, subpart F. Subpart G
541.401 Computer manufacture and repair. contains regulations regarding salary
541.402 Executive and administrative requirements applicable to most of the
computer employees. exemptions, including salary levels and
Subpart F—Outside Sales Employees the salary basis test. Subpart G also
541.500 General rule for outside sales contains a provision for exempting
employees. certain highly compensated employees.
541.501 Making sales or obtaining orders. Subpart H contains definitions and
541.502 Away from employer’s place of other miscellaneous provisions
business. applicable to all or several of the
541.503 Promotion work. exemptions.
541.504 Drivers who sell. (c) Effective July 1, 1972, the Fair
Subpart G—Salary Requirements Labor Standards Act was amended to
541.600 Amount of salary required. include within the protection of the
541.601 Highly compensated employees. equal pay provisions those employees
541.602 Salary basis. exempt from the minimum wage and
541.603 Effect of improper deductions from overtime pay provisions as bona fide
salary. executive, administrative, and
541.604 Minimum guarantee plus extras. professional employees (including any
541.605 Fee basis. employee employed in the capacity of
541.606 Board, lodging or other facilities. academic administrative personnel or
Subpart H—Definitions And Miscellaneous teacher in elementary or secondary
Provisions schools), or in the capacity of an outside
■ For the reasons set forth above, 29 541.700 Primary duty. sales employee under section 13(a)(1) of
CFR part 541 is revised to read as 541.701 Customarily and regularly. the Act. The equal pay provisions in
follows: 541.702 Exempt and nonexempt work. section 6(d) of the Fair Labor Standards
541.703 Directly and closely related. Act are administered and enforced by
PART 541—DEFINING AND 541.704 Use of manuals. the United States Equal Employment
DELIMITING THE EXEMPTIONS FOR 541.705 Trainees. Opportunity Commission.
EXECUTIVE, ADMINISTRATIVE, 541.706 Emergencies.
PROFESSIONAL, COMPUTER AND 541.707 Occasional tasks. § 541.1 Terms used in regulations.
OUTSIDE SALES EMPLOYEES 541.708 Combination exemptions. Act means the Fair Labor Standards
541.709 Motion picture producing industry.
Subpart A—General Regulations 541.710 Employees of public agencies. Act of 1938, as amended.
Sec. Authority: 29 U.S.C. 213; Public Law 101– Administrator means the
541.0 Introductory statement. 583, 104 Stat. 2871; Reorganization Plan No. Administrator of the Wage and Hour
541.1 Terms used in regulations. 6 of 1950 (3 CFR 1945–53 Comp. p. 1004); Division, United States Department of
541.2 Job titles insufficient. Secretary’s Order No. 4–2001 (66 FR 29656). Labor. The Secretary of Labor has
541.3 Scope of the section 13(a)(1) delegated to the Administrator the
exemptions. Subpart A—General Regulations functions vested in the Secretary under
541.4 Other laws and collective bargaining § 541.0 Introductory statement. sections 13(a)(1) and 13(a)(17) of the
agreements. (a) Section 13(a)(1) of the Fair Labor Fair Labor Standards Act.
Subpart B—Executive Employees Standards Act, as amended, provides an § 541.2 Job titles insufficient.
541.100 General rule for executive exemption from the Act’s minimum A job title alone is insufficient to
employees. wage and overtime requirements for any establish the exempt status of an
541.101 Business owner. employee employed in a bona fide employee. The exempt or nonexempt
541.102 Management. executive, administrative, or status of any particular employee must
541.103 Department or subdivision. professional capacity (including any
541.104 Two or more other employees. employee employed in the capacity of be determined on the basis of whether
541.105 Particular weight. the employee’s salary and duties meet
541.106 Concurrent duties. academic administrative personnel or the requirements of the regulations in
Subpart C—Administrative Employees teacher in elementary or secondary this part.
541.200 General rule for administrative schools), or in the capacity of an outside
employees. sales employee, as such terms are § 541.3 Scope of the section 13(a)(1)
541.201 Directly related to management or defined and delimited from time to time exemptions.
general business operations. by regulations of the Secretary, subject (a) The section 13(a)(1) exemptions
541.202 Discretion and independent to the provisions of the Administrative and the regulations in this part do not
judgment. Procedure Act. Section 13(a)(17) of the apply to manual laborers or other ‘‘blue
541.203 Administrative exemption Act provides an exemption from the collar’’ workers who perform work
examples. minimum wage and overtime involving repetitive operations with
541.204 Educational establishments. requirements for computer systems their hands, physical skill and energy.
Subpart D—Professional Employees analysts, computer programmers, Such nonexempt ‘‘blue collar’’
541.300 General rule for professional software engineers, and other similarly employees gain the skills and
employees. skilled computer employees. knowledge required for performance of
541.301 Learned professionals. (b) The requirements for these their routine manual and physical work
541.302 Creative professionals. exemptions are contained in this part as through apprenticeships and onthejob
541.303 Teachers. follows: executive employees, subpart training, not through the prolonged
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Federal Register / Vol. 69, No. 79 / Friday, April 23, 2004 / Rules and Regulations 22261
course of specialized intellectual primary duty is not the performance of suggestions and recommendations as to
instruction required for exempt learned work requiring knowledge of an the hiring, firing, advancement,
professional employees such as medical advanced type in a field of science or promotion or any other change of status
doctors, architects and archeologists. learning customarily acquired by a of other employees are given particular
Thus, for example, nonmanagement prolonged course of specialized weight.
productionline employees and non intellectual instruction or the (b) The phrase ‘‘salary basis’’ is
management employees in maintenance, performance of work requiring defined at § 541.602; ‘‘board, lodging or
construction and similar occupations invention, imagination, originality or other facilities’’ is defined at § 541.606;
such as carpenters, electricians, talent in a recognized field of artistic or ‘‘primary duty’’ is defined at § 541.700;
mechanics, plumbers, iron workers, creative endeavor as required under and ‘‘customarily and regularly’’ is
craftsmen, operating engineers, § 541.300. Although some police defined at § 541.701.
longshoremen, construction workers officers, fire fighters, paramedics, § 541.101 Business owner.
and laborers are entitled to minimum emergency medical technicians and The term ‘‘employee employed in a
wage and overtime premium pay under similar employees have college degrees,
the Fair Labor Standards Act, and are a specialized academic degree is not a bona fide executive capacity’’ in section
not exempt under the regulations in this standard prerequisite for employment in 13(a)(1) of the Act also includes any
part no matter how highly paid they such occupations. employee who owns at least a bona fide
might be. § 541.4 Other laws and collective 20percent equity interest in the
(b)(1) The section 13(a)(1) exemptions bargaining agreements. enterprise in which the employee is
and the regulations in this part also do The Fair Labor Standards Act employed, regardless of whether the
not apply to police officers, detectives, provides minimum standards that may business is a corporate or other type of
deputy sheriffs, state troopers, highway be exceeded, but cannot be waived or organization, and who is actively
patrol officers, investigators, inspectors, reduced. Employers must comply, for engaged in its management. The term
correctional officers, parole or probation example, with any Federal, State or ‘‘management’’ is defined in § 541.102.
officers, park rangers, fire fighters, municipal laws, regulations or The requirements of Subpart G (salary
paramedics, emergency medical ordinances establishing a higher requirements) of this part do not apply
technicians, ambulance personnel, minimum wage or lower maximum to the business owners described in this
rescue workers, hazardous materials workweek than those established under section.
workers and similar employees, the Act. Similarly, employers, on their § 541.102 Management.
regardless of rank or pay level, who own initiative or under a collective Generally, ‘‘management’’ includes,
perform work such as preventing, bargaining agreement with a labor
controlling or extinguishing fires of any but is not limited to, activities such as
type; rescuing fire, crime or accident union, are not precluded by the Act interviewing, selecting, and training of
victims; preventing or detecting crimes; from providing a wage higher than the employees; setting and adjusting their
conducting investigations or inspections statutory minimum, a shorter workweek rates of pay and hours of work; directing
for violations of law; performing than the statutory maximum, or a higher the work of employees; maintaining
surveillance; pursuing, restraining and overtime premium (double time, for production or sales records for use in
apprehending suspects; detaining or example) than provided by the Act. supervision or control; appraising
supervising suspected and convicted While collective bargaining agreements employees’ productivity and efficiency
criminals, including those on probation cannot waive or reduce the Act’s for the purpose of recommending
or parole; interviewing witnesses; protections, nothing in the Act or the promotions or other changes in status;
interrogating and fingerprinting regulations in this part relieves handling employee complaints and
suspects; preparing investigative employers from their contractual grievances; disciplining employees;
reports; or other similar work. obligations under collective bargaining planning the work; determining the
(2) Such employees do not qualify as agreements. techniques to be used; apportioning the
exempt executive employees because Subpart B—Executive Employees work among the employees;
their primary duty is not management of determining the type of materials,
the enterprise in which the employee is § 541.100 General rule for executive supplies, machinery, equipment or tools
employed or a customarily recognized employees. to be used or merchandise to be bought,
department or subdivision thereof as (a) The term ‘‘employee employed in stocked and sold; controlling the flow
required under § 541.100. Thus, for a bona fide executive capacity’’ in and distribution of materials or
example, a police officer or fire fighter section 13(a)(1) of the Act shall mean merchandise and supplies; providing for
whose primary duty is to investigate any employee: the safety and security of the employees
crimes or fight fires is not exempt under (1) Compensated on a salary basis at or the property; planning and
section 13(a)(1) of the Act merely a rate of not less than $455 per week (or controlling the budget; and monitoring
because the police officer or fire fighter $380 per week, if employed in or implementing legal compliance
also directs the work of other employees American Samoa by employers other measures.
in the conduct of an investigation or than the Federal Government), exclusive § 541.103 Department or subdivision.
fighting a fire. of board, lodging or other facilities;
(3) Such employees do not qualify as (2) Whose primary duty is (a) The phrase ‘‘a customarily
exempt administrative employees management of the enterprise in which recognized department or subdivision’’
because their primary duty is not the the employee is employed or of a is intended to distinguish between a
performance of work directly related to customarily recognized department or mere collection of employees assigned
the management or general business subdivision thereof; from time to time to a specific job or
operations of the employer or the (3) Who customarily and regularly series of jobs and a unit with permanent
employer’s customers as required under directs the work of two or more other status and function. A customarily
§541.200. employees; and recognized department or subdivision
(4) Such employees do not qualify as (4) Who has the authority to hire or must have a permanent status and a
exempt professionals because their fire other employees or whose continuing function. For example, a
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22262 Federal Register / Vol. 69, No. 79 / Friday, April 23, 2004 / Rules and Regulations
large employer’s human resources same two employees in the same does not preclude the exemption if the
department might have subdivisions for department does not satisfy this assistant manager’s primary duty is
labor relations, pensions and other requirement. However, a fulltime management. An assistant manager can
benefits, equal employment employee who works four hours for one supervise employees and serve
opportunity, and personnel supervisor and four hours for a different customers at the same time without
management, each of which has a supervisor, for example, can be credited losing the exemption. An exempt
permanent status and function. as a halftime employee for both employee can also simultaneously
(b) When an enterprise has more than supervisors. direct the work of other employees and
one establishment, the employee in § 541.105 Particular weight. stock shelves.
charge of each establishment may be To determine whether an employee’s (c) In contrast, a relief supervisor or
considered in charge of a recognized suggestions and recommendations are working supervisor whose primary duty
subdivision of the enterprise. given ‘‘particular weight,’’ factors to be is performing nonexempt work on the
(c) A recognized department or considered include, but are not limited production line in a manufacturing
subdivision need not be physically to, whether it is part of the employee’s plant does not become exempt merely
within the employer’s establishment job duties to make such suggestions and because the nonexempt production line
and may move from place to place. The recommendations; the frequency with employee occasionally has some
mere fact that the employee works in which such suggestions and responsibility for directing the work of
more than one location does not recommendations are made or other nonexempt production line
invalidate the exemption if other factors requested; and the frequency with employees when, for example, the
show that the employee is actually in which the employee’s suggestions and exempt supervisor is unavailable.
charge of a recognized unit with a recommendations are relied upon. Similarly, an employee whose primary
continuing function in the organization. Generally, an executive’s suggestions duty is to work as an electrician is not
(d) Continuity of the same an exempt executive even if the
subordinate personnel is not essential to and recommendations must pertain to employee also directs the work of other
the existence of a recognized unit with employees whom the executive employees on the job site, orders parts
a continuing function. An otherwise customarily and regularly directs. It and materials for the job, and handles
exempt employee will not lose the does not include an occasional requests from the prime contractor.
exemption merely because the employee suggestion with regard to the change in
draws and supervises workers from a status of a coworker. An employee’s Subpart C—Administrative Employees
pool or supervises a team of workers suggestions and recommendations may
drawn from other recognized units, if still be deemed to have ‘‘particular § 541.200 General rule for administrative
other factors are present that indicate weight’’ even if a higher level manager’s employees.
that the employee is in charge of a recommendation has more importance (a) The term ‘‘employee employed in
recognized unit with a continuing and even if the employee does not have a bona fide administrative capacity’’ in
function. authority to make the ultimate decision section 13(a)(1) of the Act shall mean
as to the employee’s change in status. any employee:
§ 541.104 Two or more other employees. (1) Compensated on a salary or fee
(a) To qualify as an exempt executive § 541.106 Concurrent duties. basis at a rate of not less than $455 per
under § 541.100, the employee must (a) Concurrent performance of exempt week (or $380 per week, if employed in
customarily and regularly direct the and nonexempt work does not American Samoa by employers other
work of two or more other employees. disqualify an employee from the than the Federal Government), exclusive
The phrase ‘‘two or more other executive exemption if the requirements of board, lodging or other facilities;
employees’’ means two fulltime of § 541.100 are otherwise met. Whether (2) Whose primary duty is the
employees or their equivalent. One full an employee meets the requirements of performance of office or nonmanual
time and two halftime employees, for § 541.100 when the employee performs work directly related to the management
example, are equivalent to two fulltime concurrent duties is determined on a or general business operations of the
employees. Four halftime employees casebycase basis and based on the employer or the employer’s customers;
are also equivalent. factors set forth in § 541.700. Generally, and
(b) The supervision can be distributed exempt executives make the decision (3) Whose primary duty includes the
among two, three or more employees, regarding when to perform nonexempt exercise of discretion and independent
but each such employee must duties and remain responsible for the judgment with respect to matters of
customarily and regularly direct the success or failure of business operations significance.
work of two or more other fulltime under their management while (b) The term ‘‘salary basis’’ is defined
employees or the equivalent. Thus, for performing the nonexempt work. In at § 541.602; ‘‘fee basis’’ is defined at
example, a department with five full contrast, the nonexempt employee §541.605; ‘‘board, lodging or other
time nonexempt workers may have up generally is directed by a supervisor to facilities’’ is defined at § 541.606; and
to two exempt supervisors if each such perform the exempt work or performs ‘‘primary duty’’ is defined at § 541.700.
supervisor customarily and regularly the exempt work for defined time
directs the work of two of those periods. An employee whose primary § 541.201 Directly related to management
workers. duty is ordinary production work or or general business operations.
(c) An employee who merely assists routine, recurrent or repetitive tasks (a) To qualify for the administrative
the manager of a particular department cannot qualify for exemption as an exemption, an employee’s primary duty
and supervises two or more employees executive. must be the performance of work
only in the actual manager’s absence (b) For example, an assistant manager directly related to the management or
does not meet this requirement. in a retail establishment may perform general business operations of the
(d) Hours worked by an employee work such as serving customers, employer or the employer’s customers.
cannot be credited more than once for cooking food, stocking shelves and The phrase ‘‘directly related to the
different executives. Thus, a shared cleaning the establishment, but management or general business
responsibility for the supervision of the performance of such nonexempt work operations’’ refers to the type of work
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