I.  Texas Overtime Exemptions

Texas overtime pay is governed by the Fair Labor Standards Act, or the FLSA.  As stated in my post that provided an overview of Texas overtime laws, as a general rule, workers are required to be paid time and a half for every hour worked in a week in excess of forty hours.  It is important that people understand what it means to be exempt vs. non-exempt.  Many people believe that they are exempt from overtime pay simply because they are paid a salary.  This is not true – to be exempt from overtime pay an employee must generally be paid a salary and perform exempt job duties.  This post will provide the most common exemptions from overtime pay in Texas. More detailed articles regarding each exemption, and the regulations and cases interpreting them, will be posted in the weeks and months to follow.

It is important to keep in mind that when the issue is whether one is exempt vs. non-exempt status, employers have the burden to prove that each employee claimed to be exempt from overtime pay satisfies each element of the exemption. If the employer does not meet this burden, the worker will be found to be a non-exempt employee.  In addition, job titles are insufficient to determine whether an employee is exempt from overtime pay. See 29 C.F.R. § 541.2. Thus, someone who is categorized by their employer as an “executive” or a “professional” or who is conferred a title indicating such a classification is not exempt from overtime pay on this basis alone. Instead, the exempt or nonexempt status of an employee is determined based on whether the employee’s salary and duties meet the requirements of the claimed overtime exemption.

II. What does “Exempt” mean?  How is “Exempt” defined?

The FLSA includes what are known as “white collar” exemptions for executive, administrative and professional employees. While the Department of Labor has attempted to clarify these exemptions through regulations and position papers, applying them to real life situations still results in considerable litigation. To fall within the executive, administrative and/or professional exemptions, an employee must meet the “salary basis” test, and satisfy the particular job duties for the respective exemption. Because the salary basis is an essential element to each of the “white collar” exemptions, it will be discussed first, followed by an analysis of each of the most common overtime exemptions.

A. The “Salary Basis” Test for Overtime Pay Exemptions

A salary is a predetermined amount of pay that constitutes all or part of the employee’s compensation for the pay period. This predetermined amount is a fixed amount and may not be reduced based on the quality or quantity of the work performed. A salary is generally expressed as an amount paid per week, per month or per year.

To satisfy the “salary basis” test, an employee must earn the minimum required salary of $455 per week exclusive of “board, lodging or other facilities.” An exempt employee’s salary cannot be reduced because of variances in the amount of hours worked per week, unless the employee takes unpaid leave or his salary is subject to certain other permitted deductions set forth under 29 C.F.R. 541.602.

B. The Executive Overtime Pay Exemption

To meet the executive overtime exemption, the following elements must be met:

1. The employee must be compensated on a salary basis (as defined in the regulations) at a rate not less than $455 per week;
2. The employee’s primary duty must be managing the enterprise, or managing a customarily recognized department or subdivision of the enterprise;
3. The employee must customarily and regularly direct the work of at least two or more other full-time employees or their equivalent; and
4. The employee must have the authority to hire or fire other employees, or the employee’s suggestions and recommendations as to the hiring, firing, advancement, promotion or any other change of status of other employees must be given particular weight.

C. The Administrative Overtime Pay Exemption

To satisfy the administrative overtime exemption, all of the following requirements must be satisfied:

1. The employee must be compensated on a salary basis at a rate not less than $455 per week;
2. The employee’s primary duty must be 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. The employee’s primary duty includes the exercise of discretion and independent judgment with respect to matters of significance.

D. The Professional Overtime Pay Exemption

An employee must meet all of the following requirements to fall within the professional overtime exemption:

1. The employee must be compensated on a salary basis at a rate not less than $455 per week;
2. The employee’s 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.

II. The Highly Compensated Employee Overtime Pay Exemption

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 basis) are exempt from overtime pay if they customarily and regularly perform at least one of the duties of an exempt executive, administrative or professional employee identified above.

III. The Computer Related Occupation Overtime Pay Exemption

To qualify for the computer employee 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; and
3. The employee’s primary duty must consist of:
 the application of systems analysis techniques and procedures, including consulting with users, to determine hardware, software or system functional specifications;
 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;
 the design, documentation, testing, creation or modification of computer programs related to machine operating systems; or
 a combination of the aforementioned duties, the performance of which requires the same level of skills.

IV. The Outside Sales Overtime Pay Exemption

To qualify for the outside sales employee exemption, each of these elements must be met:

1. The employee’s primary duty must be making sales (as defined in the FLSA), or obtaining orders or contracts for services or for the use of facilities for which a consideration will be paid by the client or customer; and
2. The employee must be customarily and regularly engaged away from the employer’s place or places of business. 
The salary basis test discussed above does not apply to the outside sales exemption.

About the Author: I represent individuals in a variety of matters, including employment claims for lost wages.  While my office is located in Fort Worth, I am admitted to practice in every state and federal court in Texas, and I am able handle unpaid overtime cases in Dallas, Fort Worth, Denton, Houston, Waco, Austin, San Antonio, and across Texas. If you believe you may be owed unpaid overtime, call me at 817.908.9861 or fill out my contact form for a free evaluation or email me by clicking this link.

Author: Josh Borsellino