[Congressional Record Volume 168, Number 68 (Tuesday, April 26, 2022)]
[House]
[Pages H4496-H4508]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                     NOTICE OF PROPOSED RULEMAKING

                                                    U.S. Congress,


                     Office of Congressional Workplace Rights,

                                   Washington, DC, April 26, 2022.
     Hon. Nancy Pelosi,
     Speaker of the House of Representatives,
     The Capitol, Washington, DC.
       Dear Madam Speaker: Section 203(c)(1) of the Congressional 
     Accountability Act (CAA), 2 U.S.C. 1313(c)(1), requires the 
     Board of Directors of the Office of Congressional Workplace 
     Rights (``the Board'') to issue regulations implementing 
     Section 203 of the CAA relating to the Fair Labor Standards 
     Act of 1938 (``FLSA''), 29 U.S.C. 206 et seq., made 
     applicable to the legislative branch by the CAA. 2 U.S.C. 
     1313(a)(1).
       Section 304(b)(1) of the CAA, 2 U.S.C. 1384(b)(1), requires 
     that the Board issue a general notice of proposed rulemaking 
     by transmitting ``such notice to the Speaker of the House of 
     Representatives and the President Pro Tempore of the Senate 
     for publication in the Congressional Record on the first day 
     of which both Houses are in session following such 
     transmittal.''
       On behalf of the Board, I am hereby transmitting the 
     attached notice of proposed rulemaking to the Speaker of the 
     House of Representatives. I request that this notice be 
     published in the House section of the Congressional Record on 
     the first day on which both Houses are in session following 
     receipt of this transmittal. In compliance with Section 
     304(b)(2) of the CAA, a comment period

[[Page H4497]]

     of 30 days after the publication of this notice of proposed 
     rulemaking is being provided before adoption of the rules.
       Any inquiries regarding this notice should be addressed to 
     Teresa James, Acting Executive Director of the Office of 
     Congressional Workplace Rights, 110 Second Street, S.E., Room 
     LA-200, Washington, DC 20540-1999; telephone: 202-724-9250.
           Sincerely,
                                           Barbara Childs Wallace,
        Chair of the Board of Directors, -Office of Congressional 
                                                 Workplace Rights.
       Attachment.

 From the Board of Directors of the Office of Congressional Workplace 
                                 Rights

       Implementing Certain Substantive Rights and Protections of 
     the Fair Labor Standards Act of 1938, as Required by Section 
     203 of the Congressional Accountability Act of 1995 (CAA), 2 
     U.S.C. 1313.

                     Notice of Proposed Rulemaking

     Background:
       The purpose of this Notice is to initiate the process for 
     replacing existing legislative branch Fair Labor Standards 
     Act (FLSA) overtime substantive regulations under section 203 
     of the Congressional Accountability Act (CAA), 2 U.S.C. 1302 
     et seq., which were adopted by the Board and approved by the 
     House and the Senate in 1996, with new regulations that 
     substantially mirror the overtime exemption regulations 
     promulgated by the Secretary of Labor thereafter and 
     presently in effect. These modifications are necessary in 
     order to bring existing legislative branch FLSA overtime 
     regulations in line with multiple regulatory changes that 
     have occurred since 1996. The regulations that presently 
     implement the FLSA for the Legislative Branch are woefully 
     out of date because the Secretary of Labor's updated FLSA 
     regulations do not automatically apply to employing offices 
     and employees covered by the CAA. As a result, the employees 
     of the Legislative Branch are presently held to FLSA overtime 
     standards that are no longer realistic in today's economy.
       Do FLSA overtime pay requirements apply via the CAA to 
     Legislative Branch employing offices?
       Yes. Section 203(a)(1) of the CAA states: ``[t]he rights 
     and protections established by subsections (a)(1) and (d) of 
     section 6, section 7, and section 12(c) of the [FLSA] . . . 
     (29 U.S.C. 206(a)(1), 207, 212(c)) shall apply to covered 
     employees.'' Section 7 of the FLSA, 29 U.S.C. 207, includes 
     the requirements regarding the payment of time and one half 
     overtime pay to employees.
       Are there existing overtime exemption regulations already 
     in force under the CAA?
       Yes. In 1996, the Board of Directors of the Office of 
     Compliance--now the Office of Congressional Workplace 
     Rights--promulgated the existing CAA overtime exemption 
     regulations based on Department of Labor's regulations that 
     were in effect at the time. Those regulations were adopted 
     pursuant to the CAA section 304 procedure outlined herein 
     below. Those regulations are found at Parts H541 (applicable 
     to the House of Representatives), S541 (applicable to the 
     Senate), and C541 (applicable to the other employing offices 
     covered by section 203 of the CAA) of the FLSA Regulations of 
     the (then) Office of Compliance. Those regulations remain in 
     force in the Legislative Branch until replaced by new 
     regulations. The 1996 FLSA Substantive regulations can be 
     accessed via the Office of Congressional Workplace Rights web 
     site: www.ocwr.gov.
 What is the history of the FLSA overtime salary threshold 
     test?
       Historically, the salary threshold test contained in the 
     Department of Labor's regulations has been a fixed amount 
     that has not changed with inflation. In 2004, the Department 
     of Labor promulgated regulations increasing the salary 
     threshold test so that employees with low salaries would not 
     be deprived of overtime pay. Thus, in 2004, the Board of 
     Directors adopted and submitted for publication in the 
     Congressional Record amendments to its 1996 substantive 
     regulations regarding the FLSA overtime exemptions. 150 Cong. 
     Rec. H7850-07, S9917-01 (daily ed. September 29, 2004).
       The 2004 Amendments to the Legislative Branch substantive 
     regulations adopted by the Board mirrored new overtime 
     exemption regulations promulgated by the Department of Labor, 
     Vol. 69 of the Federal Register, No. 79, at pp. 22122 et 
     seq., which substantially changed the prior overtime 
     exemptions. More specifically, the 2004 FLSA amendments 
     adopted by the Board of Directors reflected the new Part 541 
     in the updated DOL regulations then in effect, which 
     restructured much of the regulatory framework for determining 
     whether a particular employee is exempt from FLSA overtime 
     requirements. The 2004 changes included: (1) eliminating the 
     ``short'' and ``long tests and revising the standard duties 
     test for each exemption category; (2) significantly 
     increasing the salary level under DOL's revised standard 
     duties test to $455 per week for executive, administrative, 
     and professional employee exemptions and (3) creating a 
     ``highly compensated executive'' category in which employees 
     who are paid total annual compensation of at least $100,000 
     (which must include at least $455 per week paid on a salary 
     or fee basis) are exempt from the FLSA's overtime 
     requirements if they customarily and regularly perform at 
     least one of the exempt duties or responsibilities of an 
     executive, administrative, or professional employee 
     identified in the standard tests for exemption.
       However, because Congress did not approve the 2004 
     amendments adopted by the Board, the 2004 DOL regulations 
     containing FLSA exemption updates were not made applicable to 
     the Legislative Branch. The regulations proposed by the Board 
     in this Notice of Proposed Rulemaking incorporate the 2004 
     amendments previously adopted by the Board after public 
     notice and comment, and further update the overtime exemption 
     regulations to mirror further Department of Labor changes in 
     2016, 2019, and 2020.
       Why is this Notice being issued?
       Over the past 25 years, the Secretary of Labor has 
     substantially rewritten and expanded Part 541 and has 
     repeatedly increased the salary threshold test. However, the 
     Secretary of Labor's regulations do not automatically apply 
     to employing offices and employees covered by the CAA. 
     Because the 2004 amendments adopted by the Board were not 
     approved by Congress, unlike the Department of Labor's 
     current regulations, the present salary threshold test within 
     the Legislative Branch sets the salary below the poverty 
     level. Specifically, the 1996 Substantive Regulations has a 
     salary basis test of ``not less than $155 per week'' which is 
     an annual salary of less than $8000.00 per year. In other 
     sections of the 1996 Substantive Regulations that remain 
     applicable to the Legislative Branch, the salary basis test 
     is ``not less than $250 per week'' which is yearly salary of 
     approximately $13,000.00. This Notice is being issued, in 
     part, to modify this substantially lower salary test set by 
     the 1996 FLSA Substantive Regulations that are financially 
     outdated and yet remain in effect.
       This Notice of Proposed Rulemaking is occasioned by the 
     promulgation of new overtime exemption regulations by the 
     Secretary of Labor at Vol. 69 of the Federal Register, No. 
     79, at pp. 22122 et seq., on August 23, 2004; Vol. 81 of the 
     Federal Register, at pp. 32391 et seq., on May 23, 2016; Vol. 
     84 of the Federal Register, at pp. 51230 et seq., on 
     September 27, 2019; and Vol. 85 of the Federal Register, at 
     pp. 34970-01 et seq., on June 8, 2020. The new regulations of 
     the Secretary of Labor as set out at 29 U.S.C. Part 541, 
     reflect the substantial restructuring of overtime exemptions 
     described above, which to date have not yet been made 
     applicable to the Legislative Branch.
       Is the Board proposing to adopt the current Department of 
     Labor Regulations verbatim?
       The Board has deliberated regarding the question of whether 
     ``good cause'' exists pursuant to section 203(c)(2) of the 
     CAA, 2 U.S.C. 1313(c)(2), for varying these proposed 
     regulations from the Department of Labor regulations. The 
     Board reconsidered comments submitted in response to the 
     Notice of Proposed Rulemaking in 2004 and now agrees that 
     subsections that refer to occupations that do not apply in 
     any manner to the Congressional branch, e.g., Sec. 541.101--
     Business owner and Subpart F--Outside Sales Employees, should 
     not be retained as part of the regulations adopted and/or 
     approved for the Legislative branch. Substantive Regulations 
     that are focused solely on occupations existing within the 
     Legislative Branch would be more effective for the 
     implementation of the rights and protections under this 
     section. As a result, these sections are delineated with bold 
     brackets in this Notice.
       Why are there separate sets of existing FLSA regulations 
     for the House of Representatives, the Senate, and the other 
     employing offices covered by the CAA?
       Section 304(a)(2)(B) of the CAA, 2 U.S.C. 1384(a)(2)(B), 
     requires that the substantive rules of the Board of Directors 
     ``shall consist of 3 separate bodies of regulations, which 
     shall apply, respectively, to--(i) the Senate and employees 
     of the Senate; (ii) the House of Representatives and 
     employees of the House of Representatives; and (iii) the 
     other covered employees and employing offices.'' In 1996, the 
     House of Representatives (H. Res. 400) and the Senate (S. 
     Res. 242) each adopted by resolution the FLSA regulations 
     applicable to each body. The Senate and House of 
     Representatives adopted by concurrent resolution (S. Con. 
     Res. 51) the regulations applicable to other employing 
     offices and employees.
       Are there substantive differences in the proposed 
     regulations for the House of Representatives, the Senate, and 
     the other employing offices?
       No. While there are some differences in other parts of the 
     existing FLSA regulations applicable to the Senate, the House 
     of Representatives, and the other employing offices (chiefly 
     related to the mandate at section 203(c)(3) of the CAA, 2 
     U.S.C. 1313(c)(3), regarding ``covered employees whose work 
     schedules directly depend on the schedule of the House of 
     Representatives or the Senate . . .''), the Board of 
     Directors has identified no ``good cause'' for varying the 
     text of these regulations. Therefore, if the proposed part 
     541 regulations are adopted, the prefixes ``H'', ``S'', and 
     ``C'' will be affixed to each of the sets of regulations for 
     the House, for the Senate, and for the other employing 
     offices, but the text of the part 541 regulations will be 
     identical.
       How are substantive regulations proposed and approved under 
     the CAA?
       Section 203(c)(2) of the CAA, 2 U.S.C. 1313(c)(2), requires 
     that the Board of Directors propose substantive regulations 
     implementing the FLSA overtime requirements which are ``the 
     same as substantive regulations promulgated by the Secretary 
     of Labor to implement the statutory provisions . . .

[[Page H4498]]

     except insofar as the Board may determine, for good cause 
     shown and stated together with the regulation, that a 
     modification of such regulation would be more effective for 
     the implementation of the rights and protections under this 
     section.'' Pursuant to section 304 of the CAA, 2 U.S.C. 1384, 
     the procedure for promulgating such substantive regulations 
     requires that: (1) the Board of Directors adopt proposed 
     substantive regulations and publish a general notice of 
     proposed rulemaking in the Congressional Record; (2) there be 
     a comment period of at least 30 days after the date of 
     publication of the general notice of proposed rulemaking; (3) 
     after consideration of comments by the Board of Directors, 
     that the Board adopt regulations and transmit notice of such 
     action together with the regulations and a recommendation 
     regarding the method for Congressional approval of the 
     regulations to the Speaker of the House and President pro 
     tempore of the Senate for publication in the Congressional 
     Record; (4) committee referral and action on the proposed 
     regulations by resolution in each House, concurrent 
     resolution, or by joint resolution; and (5) final publication 
     of the approved regulations in the Congressional Record, with 
     an effective date prescribed in the final publication. For 
     more detail, please reference the text of 2 U.S.C. 1384. This 
     Notice of Proposed Rulemaking is step (1) of the outline set 
     forth above. Unless and until all of the steps of the outline 
     set forth above are completed, all employing offices and 
     covered employees continue to be required to follow the 
     existing 1996 Substantive Regulations thereby denying many 
     Legislative Branch employees of overtime benefits that they 
     would likely be entitled to pursuant to the current 
     Department of Labor overtime regulations.
       How does the Board of Directors recommend that Congress 
     approve these proposed regulations?
       Pursuant to section 304(b)(4) of the CAA, 2 U.S.C. 
     1384(b)(4), the Board of Directors is required to ``include a 
     recommendation in the general notice of proposed rulemaking 
     and in the regulations as to whether the regulations should 
     be approved by resolution of the Senate, by resolution of the 
     House of Representatives, by concurrent resolution, or by 
     joint resolution.'' The Board of Directors recommends that 
     the procedure used in 1996 be used to adopt these proposed 
     overtime exemption regulations: the House of Representatives 
     adopted the ``H'' version of the regulations by resolution; 
     the Senate adopted the ``S'' version of the regulations by 
     resolution; and the House and Senate adopted the ``C'' 
     version of the regulations applied to the other employing 
     offices by a concurrent resolution.
       Are these proposed regulations also recommended by the 
     Office of Congressional Workplace Rights' Executive Director, 
     the Deputy Executive Director for the House of 
     Representatives, and the Deputy Executive Director for the 
     Senate?
       Yes, as required by section 304(b)(1) of the CAA, 2 U.S.C. 
     1384(b)(1), the substance of these regulations is also 
     recommended by the Executive Director and Deputy Executive 
     Directors of the Office of Congressional Workplace Rights.
       How similar are the proposed CAA regulations with the 
     current Secretary of Labor regulations?
       Except for certain required changes to refer to the 
     Legislative Branch instead of the Executive Branch, which are 
     shown in the accompanying proposed regulations, the Board of 
     Directors has repeated the text of the regulations at 29 CFR 
     Part 541 verbatim. ``Good cause'' for modification of the 
     existing regulations of the Secretary of Labor, as required 
     by section 203(c)(2) of the CAA, 2 U.S.C. 1313(c)(2), 
     consists of those changes needed to reflect the authority of 
     the CAA as the enabling statute for these regulations, the 
     requirement at section 225(d)(3) of the CAA, 2 U.S.C. 
     1361(d)(3), that the CAA ''shall not be construed to 
     authorize enforcement by the executive branch of this Act. . 
     . .''. If there is any additional good cause for a particular 
     proposed variation from the Secretary of Labor's regulations, 
     it is set out adjacent to that provision of the proposed 
     regulation.
       Are these proposed CAA regulations available to persons 
     with disabilities in an alternate format?
       This Notice of Proposed Rulemaking is available on the 
     Office of Congressional Workplace Rights' web site, 
     www.ocwr.gov which is compliant with section 508 of the 
     Rehabilitation Act of 1973 as amended, 29 U.S.C. 794(d). This 
     Notice can also be made available in large print, Braille, or 
     other alternative format. Requests for this Notice in an 
     alternative format should be made via email to: 
     [email protected].

        30-Day Comment Period Regarding the Proposed Regulations

       How can I submit comments regarding the proposed 
     regulations?
       Comments regarding the proposed new overtime exemption 
     regulations of the Office of Congressional Workplace Rights 
     set forth in this NOTICE are invited for a period of thirty 
     (30) days following the date of the appearance of this NOTICE 
     in the Congressional Record. Submission of comments must be 
     made in writing to the Executive Director, Office of 
     Congressional Workplace Rights, via email at rule-
[email protected]. Copies of submitted comments will be 
     available for review on the Office's web site at 
     www.ocwr.gov.
 Supplementary Information:
       The Congressional Accountability Act of 1995 (CAA), PL 10-
     91, was enacted into law on January 23, 1995. The CAA applies 
     the rights and protections of 12 federal labor and employment 
     statutes to covered employees and employing offices within 
     the Legislative Branch of Government. Section 301 of the CAA 
     (2 U.S.C. 1381), as amended, establishes the Office of 
     Congressional Workplace Rights as an independent office 
     within the Legislative Branch.

                  How to Read the Proposed Amendments

       The text of the proposed amendments reproduces the text of 
     the current regulations promulgated by the Secretary of Labor 
     at 29 CFR Part 541, and shows changes proposed for the CAA 
     version of these same regulations. Changes proposed by the 
     Board of Directors of the Office of Congressional Workplace 
     Rights are shown as follows: deletions are marked with a 
     [bracket] and added text is bolded within angled 
     <>. Therefore, if these regulations are approved as 
     proposed, the deletion within bracketed text will disappear 
     from the regulations and the added text within angled 
     brackets will remain but not in bold. If these regulations 
     are approved for the House of Representatives by resolution 
     of the House, they will be promulgated with the prefix ``H'' 
     appearing before each regulations section number. If these 
     regulations are approved for the Senate by resolution of the 
     Senate, they will be promulgated with the prefix ``S'' 
     appearing before each regulations section number. If these 
     regulations are approved for the other employing offices by 
     joint or concurrent resolution of the House of 
     Representatives and the Senate, they will be promulgated with 
     the prefix ``C'' appearing before each regulations section 
     number.

                Proposed Overtime Exemption Regulations

    Part 541--Defining and Delimiting the Exemptions for Executive, 
    Administrative, Professional, and Computer [and Outside Sales] 
                               Employees

     SUBPART A--GENERAL REGULATIONS
     Sec.
     541.0 Introductory statement.
     541.1 Terms used in regulations.
     541.2 Job titles insufficient.
     541.3 Scope of the section 13(a)(1) exemptions.
     541.4 Other laws and collective bargaining agreements.
     SUBPART B--EXECUTIVE EMPLOYEES
     541.100 General rule for executive employees.
     [541.101 Business owner.]
     541.102 Management.
     541.103 Department or subdivision.
     541.104 Two or more other employees.
     541.105 Particular weight.
     541.106 Concurrent duties.
     SUBPART C--ADMINISTRATIVE EMPLOYEES
     541.200 General rule for administrative employees.
     541.201 Directly related to management or general business 
         operations.
     541.202 Discretion and independent judgment.
     541.203 Administrative exemption examples.
     541.204 Educational establishments.
     SUBPART D--PROFESSIONAL EMPLOYEES
     541.300 General rule for professional employees.
     541.301 Learned professionals.
     541.302 Creative professionals.
     541.303 Teachers.
     541.304 Practice of law or medicine.
     SUBPART E--COMPUTER EMPLOYEES
     541.400 General rule for computer employees.
     541.401 Computer manufacture and repair.
     541.402 Executive and administrative computer employees.
     [SUBPART F--OUTSIDE SALES EMPLOYEES]
     [541.500 General rule for outside sales employees.]
     [541.501 Making sales or obtaining orders.]
     [541.502 Away from employer's place of business.]
     [541.503 Promotion work.]
     [541.504 Drivers who sell.]
     SUBPART G--SALARY REQUIREMENTS
     541.600 Amount of salary required.
     541.601 Highly compensated employees.
     541.602 Salary basis.
     541.603 Effect of improper deductions from salary.
     541.604 Minimum guarantee plus extras.
     541.605 Fee basis.
     541.606 Board, lodging or other facilities.
     SUBPART H--DEFINITIONS AND MISCELLANEOUS PROVISIONS
     541.700 Primary duty.
     541.701 Customarily and regularly.
     541.702 Exempt and nonexempt work.
     541.703 Directly and closely related.
     541.704 Use of manuals.
     541.705 Trainees.
     541.706 Emergencies.
     541.707 Occasional tasks.
     541.708 Combination exemptions.
     [541.709 Motion picture producing industry.]
     541.710 Employees of public agencies.
     SUBPART A--GENERAL REGULATIONS (Sec. Sec. 541.0-541.4)
     Sec. 541.0 Introductory statement.
       (a) Section 13(a)(1) of the Fair Labor Standards Act, as 
     amended, provides an exemption from the Act's minimum wage 
     and overtime requirements for any employee employed in a bona 
     fide executive, administrative, or professional capacity 
     (including any employee employed in the capacity of academic 
     administrative personnel or teacher in

[[Page H4499]]

     elementary or secondary schools)[, or in the capacity of an 
     outside sales employee, as such terms are defined and 
     delimited from time to time by regulations of the Secretary, 
     subject to the provisions of the Administrative Procedure 
     Act.] Section 13(a)(17) of the Act provides an exemption from 
     the minimum wage and overtime requirements for computer 
     systems analysts, computer programmers, software engineers, 
     and other similarly skilled computer employees.
       (b) The requirements for these exemptions are contained in 
     this part as follows: executive employees, subpart B; 
     administrative employees, subpart C; professional employees, 
     subpart D; computer employees, subpart E[; outside sales 
     employees, subpart F]. Subpart G contains regulations 
     regarding salary requirements applicable to most of the 
     exemptions, including salary levels and the salary basis 
     test. Subpart G also contains a provision for exempting 
     certain highly compensated employees. Subpart H contains 
     definitions and other miscellaneous provisions applicable to 
     all or several of the exemptions.
       (c) Effective July 1, 1972, the Fair Labor Standards Act 
     was amended to include within the protection of the equal pay 
     provisions those employees exempt from the minimum wage and 
     overtime pay provisions as bona fide executive, 
     administrative, and professional employees (including any 
     employee employed in the capacity of academic administrative 
     personnel or teacher in elementary or secondary schools)[, or 
     in the capacity of an outside sales employee under section 
     13(a)(1) of the Act]. The equal pay provisions in section 
     6(d) of the Fair Labor Standards Act are administered and 
     enforced by the [United States Equal Employment Opportunity 
     Commission] <>.
     Sec. 541.1 Terms used in regulations.
       Act means the Fair Labor Standards Act of 1938, as amended.
       [Administrator means the Administrator of the Wage and Hour 
     Division, United States Department of Labor. The Secretary of 
     Labor has delegated to the Administrator the functions vested 
     in the Secretary undersections 13(a)(1) and 13(a)(17) of the 
     Fair Labor Standards Act.] <>
     Sec. 541.2 Job titles insufficient.
       A job title alone is insufficient to establish the exempt 
     status of an employee. The exempt or nonexempt status of any 
     particular employee must be determined on the basis of 
     whether the employee's salary and duties meet the 
     requirements of the regulations in this part.
     Sec. 541.3 Scope of the section 13(a)(1) exemptions.
       (a) The section 13(a)(1) exemptions and the regulations in 
     this part do not apply to manual laborers or other ``blue 
     collar'' workers who perform work involving repetitive 
     operations with their hands, physical skill and energy. Such 
     nonexempt ``blue collar'' employees gain the skills and 
     knowledge required for performance of their routine manual 
     and physical work through apprenticeships and on-the-job 
     training, not through the prolonged course of specialized 
     intellectual instruction required for exempt learned 
     professional employees such as medical doctors, architects 
     and archeologists. Thus, for example, non-management 
     production-line employees and non-management employees in 
     maintenance, construction and similar occupations such as 
     carpenters, electricians, mechanics, plumbers, iron workers, 
     craftsmen, operating engineers, longshoremen, construction 
     workers and laborers are entitled to minimum wage and 
     overtime premium pay under the Fair Labor Standards Act, and 
     are not exempt under the regulations in this part no matter 
     how highly paid they might be.
       (b)(1) The section 13(a)(1) exemptions and the regulations 
     in this part also do not apply to police officers, 
     detectives, deputy sheriffs, state troopers, highway patrol 
     officers, investigators, inspectors, correctional officers, 
     parole or probation officers, park rangers, fire fighters, 
     paramedics, emergency medical technicians, ambulance 
     personnel, rescue workers, hazardous materials workers and 
     similar employees, regardless of rank or pay level, who 
     perform work such as preventing, controlling or extinguishing 
     fires of any type; rescuing fire, crime or accident victims; 
     preventing or detecting crimes; conducting investigations or 
     inspections for violations of law; performing surveillance; 
     pursuing, restraining and apprehending suspects; detaining or 
     supervising suspected and convicted criminals, including 
     those on probation or parole; interviewing witnesses; 
     interrogating and fingerprinting suspects; preparing 
     investigative reports; or other similar work.
       (2) Such employees do not qualify as exempt executive 
     employees because their primary duty is not management of the 
     enterprise in which the employee is employed or a customarily 
     recognized department or subdivision thereof as required 
     under Sec. 541.100. Thus, for example, a police officer or 
     fire fighter whose primary duty is to investigate crimes or 
     fight fires is not exempt under section 13(a)(1) of the Act 
     merely because the police officer or fire fighter also 
     directs the work of other employees in the conduct of an 
     investigation or fighting a fire.
       (3) Such employees do not qualify as exempt administrative 
     employees because their primary duty is not the performance 
     of work directly related to the management or general 
     business operations of the employer or the employer's 
     customers as required under Sec. 541.200.
       (4) Such employees do not qualify as exempt professionals 
     because their primary duty is not the performance of work 
     requiring knowledge of an advanced type in a field of science 
     or learning customarily acquired by a prolonged course of 
     specialized intellectual instruction or the performance of 
     work requiring invention, imagination, originality or talent 
     in a recognized field of artistic or creative endeavor as 
     required under Sec. 541.300. Although some police officers, 
     fire fighters, paramedics, emergency medical technicians and 
     similar employees have college degrees, a specialized 
     academic degree is not a standard prerequisite for employment 
     in such occupations.
     Sec. 541.4 Other laws and collective bargaining agreements.
       The Fair Labor Standards Act provides minimum standards 
     that may be exceeded, but cannot be waived or reduced. 
     Employers must comply, for example, with any Federal, State 
     or municipal laws, regulations or ordinances establishing a 
     higher minimum wage or lower maximum workweek than those 
     established under the Act. Similarly, employers, on their own 
     initiative or under a collective bargaining agreement with a 
     labor union, are not precluded by the Act from providing a 
     wage higher than the statutory minimum, a shorter workweek 
     than the statutory maximum, or a higher overtime premium 
     (double time, for example) than provided by the Act. While 
     collective bargaining agreements cannot waive or reduce the 
     Act's protections, nothing in the Act or the regulations in 
     this part relieves employers from their contractual 
     obligations under collective bargaining agreements.
     SUBPART B--EXECUTIVE EMPLOYEES (Sec. Sec. 541.100-541.106)
     Sec. 541.100 General rule for executive employees.
       (a) The term ``employee employed in a bona fide executive 
     capacity'' in section 13(a)(1) of the Act shall mean any 
     employee:
       (1) Compensated on a salary basis pursuant to Sec. 541.600 
     at a rate of not less than $684 per week [(or $455 per week 
     if employed in the Commonwealth of the Northern Mariana 
     Islands, Guam, Puerto Rico, or the U.S. Virgin Islands by 
     employers other than the Federal government, or $380 per week 
     if employed in American Samoa by employers other than the 
     Federal government)], exclusive of board, lodging or other 
     facilities;
       (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.
       (b) The phrase ``salary basis'' is defined at Sec. 541.602; 
     ``board, lodging or other facilities'' is defined at 
     Sec. 541.606; ``primary duty'' is defined at Sec. 541.700; 
     and ``customarily and regularly'' is defined at Sec. 541.701.
     [Sec. 541.101 Business owner.
       The term ``employee employed in a bona fide executive 
     capacity'' in section 13(a)(1) of the Act also includes any 
     employee who owns at least a bona fide 20-percent equity 
     interest in the enterprise in which the employee is employed, 
     regardless of whether the business is a corporate or other 
     type of organization, and who is actively engaged in its 
     management. The term ``management'' is defined in 
     Sec. 541.102. The requirements of Subpart G (salary 
     requirements) of this part do not apply to the business 
     owners described in this section.]
     Sec. 541.102 Management.
       Generally, ``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; and monitoring 
     or implementing legal compliance measures.
     Sec. 541.103 Department or subdivision.
       (a) The phrase ``a customarily recognized department or 
     subdivision'' is intended to

[[Page H4500]]

     distinguish between a mere collection of employees assigned 
     from time to time to a specific job or series of jobs and a 
     unit with permanent status and function. A customarily 
     recognized department or subdivision must have a permanent 
     status and a continuing function. For example, a large 
     employer's human resources department might have subdivisions 
     for labor relations, pensions and other benefits, equal 
     employment opportunity, and personnel management, each of 
     which has a permanent status and function.
       (b) When an enterprise has more than one establishment, the 
     employee in charge of each establishment may be considered in 
     charge of a recognized subdivision of the enterprise.
       (c) A recognized department or subdivision need not be 
     physically within the employer's establishment and may move 
     from place to place. The mere fact that the employee works in 
     more than one location does not invalidate the exemption if 
     other factors show that the employee is actually in charge of 
     a recognized unit with a continuing function in the 
     organization.
       (d) Continuity of the same subordinate personnel is not 
     essential to the existence of a recognized unit with a 
     continuing function. An otherwise exempt employee will not 
     lose the exemption merely because the employee draws and 
     supervises workers from a pool or supervises a team of 
     workers drawn from other recognized units, if other factors 
     are present that indicate that the employee is in charge of a 
     recognized unit with a continuing function.
     Sec. 541.104 Two or more other employees.
       (a) To qualify as an exempt executive under Sec. 541.100, 
     the employee must customarily and regularly direct the work 
     of two or more other employees. The phrase ``two or more 
     other employees'' means two full-time employees or their 
     equivalent. One full-time and two half-time employees, for 
     example, are equivalent to two full-time employees. Four 
     half-time employees are also equivalent.
       (b) 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. Thus, for example, a department 
     with five full-time nonexempt workers may have up to two 
     exempt supervisors if each such supervisor customarily and 
     regularly directs the work of two of those workers.
       (c) An employee who merely assists the manager of a 
     particular department and supervises two or more employees 
     only in the actual manager's absence does not meet this 
     requirement.
       (d) Hours worked by an employee cannot be credited more 
     than once for different executives. Thus, a shared 
     responsibility for the supervision of the same two employees 
     in the same department does not satisfy this requirement. 
     However, a full-time employee who works four hours for one 
     supervisor and four hours for a different supervisor, for 
     example, can be credited as a half-time employee for both 
     supervisors.
     Sec. 541.105 Particular weight.
       To determine whether an employee's suggestions and 
     recommendations are given ``particular weight,'' factors to 
     be considered include, but are not limited to, whether it is 
     part of the employee's job duties to make such suggestions 
     and recommendations; the frequency with which such 
     suggestions and recommendations are made or requested; and 
     the frequency with which the employee's suggestions and 
     recommendations are relied upon. Generally, an executive's 
     suggestions and recommendations must pertain to employees 
     whom the executive customarily and regularly directs. It does 
     not include an occasional suggestion with regard to the 
     change in status of a co-worker. An employee's suggestions 
     and 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.
     Sec. 541.106 Concurrent duties.
       (a) Concurrent performance of exempt and nonexempt work 
     does not disqualify an employee from the executive exemption 
     if the requirements of Sec. 541.100 are otherwise met. 
     Whether an employee meets the requirements of Sec. 541.100 
     when the employee performs concurrent duties is determined on 
     a case-by-case basis and based on the factors set forth in 
     Sec. 541.700. Generally, exempt executives make the decision 
     regarding when to perform nonexempt duties and remain 
     responsible for the success or failure of business operations 
     under their management while performing the nonexempt work. 
     In contrast, the nonexempt employee generally is directed by 
     a supervisor to perform the exempt work or performs the 
     exempt work for defined time periods. An employee whose 
     primary duty is ordinary production work or routine, 
     recurrent or repetitive tasks cannot qualify for exemption as 
     an executive.
       (b) For example, an assistant manager in a retail 
     establishment may perform work such as serving customers, 
     cooking food, stocking shelves and cleaning the 
     establishment, but performance of such nonexempt work does 
     not preclude the exemption if the assistant manager's primary 
     duty is management. An assistant manager can supervise 
     employees and serve customers at the same time without losing 
     the exemption. An exempt employee can also simultaneously 
     direct the work of other employees and stock shelves.
       (c) In contrast, a relief supervisor or working supervisor 
     whose primary duty is performing nonexempt work on the 
     production line in a manufacturing plant does not become 
     exempt merely because the nonexempt production line employee 
     occasionally has some responsibility for directing the work 
     of other nonexempt production line employees when, for 
     example, the exempt supervisor is unavailable. Similarly, an 
     employee whose primary duty is to work as an electrician is 
     not an exempt executive even if the employee also directs the 
     work of other employees on the job site, orders parts and 
     materials for the job, and handles requests from the prime 
     contractor.
     SUBPART C--ADMINISTRATIVE EMPLOYEES (Sec. Sec. 541.200-
         541.204)
     Sec. 541.200 General rule for administrative employees.
       (a) The term ``employee employed in a bona fide 
     administrative capacity'' in section 13(a)(1) of the Act 
     shall mean any employee:
       (1) Compensated on a salary or fee basis pursuant to 
     Sec. 541.600 at a rate of not less than $684 per week [(or 
     $455 per week if employed in the Commonwealth of the Northern 
     Mariana Islands, Guam, Puerto Rico, or the U.S. Virgin 
     Islands by employers other than the Federal government, or 
     $380 per week if employed in American Samoa by employers 
     other than the Federal government)], 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.
       (b) The term ``salary basis'' is defined at Sec. 541.602; 
     ``fee basis'' is defined at Sec. 541.605; ``board, lodging or 
     other facilities'' is defined at Sec. 541.606; and ``primary 
     duty'' is defined at Sec. 541.700.
     Sec. 541.201 Directly related to management or general 
         business operations.
       (a) To qualify for the administrative exemption, an 
     employee's primary duty must be the performance of work 
     directly related to the management or general business 
     operations of the employer or the employer's customers. The 
     phrase ``directly related to the management or general 
     business operations'' refers to the type of work performed by 
     the employee. To meet this requirement, an employee must 
     perform work directly related to assisting with the running 
     or servicing of the business, as distinguished, for example, 
     from working on a manufacturing production line or selling a 
     product in a retail or service establishment.
       (b) 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; and similar 
     activities. Some of these activities may be performed by 
     employees who also would qualify for another exemption.
       (c) 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. Thus, for 
     example, employees acting as advisers or consultants to their 
     employer's clients or customers (as tax experts or financial 
     consultants, for example) may be exempt.
     Sec. 541.202 Discretion and independent judgment.
       (a) To qualify for the administrative exemption, an 
     employee's primary duty must include the exercise of 
     discretion and independent judgment with respect to matters 
     of significance. 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 ``matters of significance'' refers to 
     the level of importance or consequence of the work performed.
       (b) The phrase ``discretion and independent judgment'' must 
     be applied in the light of all the facts involved in the 
     particular employment situation in which the question arises. 
     Factors to consider when determining whether an employee 
     exercises discretion and independent judgment with respect to 
     matters of significance 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, even if the employee's assignments are 
     related to operation of a particular segment of the business; 
     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; whether the 
     employee has authority to negotiate and bind the company on 
     significant matters; whether the employee provides 
     consultation or expert advice to management; whether the 
     employee is involved in planning long- or short-

[[Page H4501]]

     term business objectives; whether the employee investigates 
     and resolves matters of significance on behalf of management; 
     and whether the employee represents the company in handling 
     complaints, arbitrating disputes or resolving grievances.
       (c) The exercise of discretion and independent judgment 
     implies that the employee has authority to make an 
     independent choice, free from immediate direction or 
     supervision. However, employees can exercise discretion and 
     independent judgment even if their decisions or 
     recommendations are reviewed at a higher level. Thus, the 
     term ``discretion and independent judgment'' does not require 
     that the decisions made by an employee have a finality that 
     goes with unlimited authority and a complete absence of 
     review. The decisions made as a result of the exercise of 
     discretion and independent judgment may consist of 
     recommendations for action rather than the actual taking of 
     action. The fact that an employee's decision may be subject 
     to review and that upon occasion the decisions are revised or 
     reversed after review does not mean that the employee is not 
     exercising discretion and independent judgment. For example, 
     the policies formulated by the credit manager of a large 
     corporation may be subject to review by higher company 
     officials who may approve or disapprove these policies. The 
     management consultant who has made a study of the operations 
     of a business and who has drawn a proposed change in 
     organization may have the plan reviewed or revised by 
     superiors before it is submitted to the client.
       (d) An employer's volume of business may make it necessary 
     to employ a number of employees to perform the same or 
     similar work. The fact that many employees perform identical 
     work or work of the same relative importance does not mean 
     that the work of each such employee does not involve the 
     exercise of discretion and independent judgment with respect 
     to matters of significance.
       (e) 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. See also Sec. 541.704 
     regarding use of manuals. 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.''
       (f) 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. For 
     example, a messenger who is entrusted with carrying large 
     sums of money does not exercise discretion and independent 
     judgment with respect to matters of significance even though 
     serious consequences may flow from the employee's neglect. 
     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.
     Sec. 541.203 Administrative exemption examples.
       (a) Insurance claims adjusters generally meet the duties 
     requirements for the administrative exemption, whether they 
     work for an insurance company or other type of company, if 
     their duties include activities such as interviewing 
     insureds, witnesses and physicians; inspecting property 
     damage; reviewing factual information to prepare damage 
     estimates; evaluating and making recommendations regarding 
     coverage of claims; determining liability and total value of 
     a claim; negotiating settlements; and making recommendations 
     regarding litigation.
       (b) Employees in the financial services industry generally 
     meet the duties requirements for the administrative exemption 
     if their duties include work such as collecting and analyzing 
     information regarding the customer's income, assets, 
     investments or debts; determining which financial products 
     best meet the customer's needs and financial circumstances; 
     advising the customer regarding the advantages and 
     disadvantages of different financial products; and marketing, 
     servicing or promoting the employer's financial products. 
     However, an employee whose primary duty is selling financial 
     products does not qualify for the administrative exemption.
       (c) 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.
       (d) 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.
       (e) 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.
       (f) Purchasing agents with authority to bind the company on 
     significant purchases generally meet the duties requirements 
     for the administrative exemption even if they must consult 
     with top management officials when making a purchase 
     commitment for raw materials in excess of the contemplated 
     plant needs.
       (g) Ordinary inspection work generally does not meet the 
     duties requirements for the administrative exemption. 
     Inspectors normally perform specialized work along 
     standardized lines involving well-established techniques and 
     procedures which may have been catalogued and described in 
     manuals or other sources. Such inspectors rely on techniques 
     and skills acquired by special training or experience. They 
     have some leeway in the performance of their work but only 
     within closely prescribed limits.
       (h) Employees usually called examiners or graders, such as 
     employees that grade lumber, generally do not meet the duties 
     requirements for the administrative exemption. Such employees 
     usually perform work involving the comparison of products 
     with established standards which are frequently catalogued. 
     Often, after continued reference to the written standards, or 
     through experience, the employee acquires sufficient 
     knowledge so that reference to written standards is 
     unnecessary. The substitution of the employee's memory for a 
     manual of standards does not convert the character of the 
     work performed to exempt work requiring the exercise of 
     discretion and independent judgment.
       (i) Comparison shopping performed by an employee of a 
     retail store who merely reports to the buyer the prices at a 
     competitor's store does not qualify for the administrative 
     exemption. However, the buyer who evaluates such reports on 
     competitor prices to set the employer's prices generally 
     meets the duties requirements for the administrative 
     exemption.
       (j) Public sector inspectors or investigators of various 
     types, such as fire prevention or safety, building or 
     construction, health or sanitation, environmental or soils 
     specialists and similar employees, generally do not meet the 
     duties requirements for the administrative exemption because 
     their work typically does not involve work directly related 
     to the management or general business operations of the 
     employer. Such employees also do not qualify for the 
     administrative exemption because their work involves the use 
     of skills and technical abilities in gathering factual 
     information, applying known standards or prescribed 
     procedures, determining which procedure to follow, or 
     determining whether prescribed standards or criteria are met.
     Sec. 541.204 Educational establishments.
       (a) The term ``employee employed in a bona fide 
     administrative capacity'' in section 13(a)(1) of the Act also 
     includes employees:
       (1) Compensated on a salary or fee basis at a rate of not 
     less than $684 per week [(or $455 per week if employed in the 
     Commonwealth of the Northern Mariana Islands, Guam, Puerto 
     Rico, or the U.S. Virgin Islands by employers other than the 
     Federal government, or $380 per week if employed in American 
     Samoa by employers other than the Federal government)], 
     exclusive of board, lodging, or other facilities; or on a 
     salary basis which is at least equal to the entrance salary 
     for teachers in the educational establishment by which 
     employed; and
       (2) Whose primary duty is performing administrative 
     functions directly related to academic instruction or 
     training in an educational establishment or department or 
     subdivision thereof.
       (b) The term ``educational establishment'' means an 
     elementary or secondary school system, an institution of 
     higher education or other educational institution. Sections 
     3(v) and 3(w) of the Act define 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 and junior college 
     curriculums in secondary education. The term ``other 
     educational establishment'' includes special schools for 
     mentally or physically disabled

[[Page H4502]]

     or gifted children, regardless of any classification of such 
     schools as elementary, secondary or higher. Factors relevant 
     in determining whether post-secondary 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.
       (c) The phrase ``performing administrative functions 
     directly related to academic instruction or training'' means 
     work related to the academic operations and functions in a 
     school rather than to administration along the lines of 
     general business operations. Such academic administrative 
     functions include operations directly in the field of 
     education. Jobs relating to areas outside the educational 
     field are not within the definition of academic 
     administration.
       (1) 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 administration of the 
     mathematics department, the English department, the foreign 
     language department, etc.; academic counselors who perform 
     work such as administering school testing programs, assisting 
     students with academic problems and advising students 
     concerning degree requirements; and other employees with 
     similar responsibilities.
       (2) Jobs relating to building management and maintenance, 
     jobs relating to the health of the students, and academic 
     staff such as social workers, psychologists, lunch room 
     managers or dietitians do not perform academic administrative 
     functions. Although such work is not considered academic 
     administration, such employees may qualify for exemption 
     under Sec. 541.200or under other sections of this part, 
     provided the requirements for such exemptions are met.
     SUBPART D--PROFESSIONAL EMPLOYEES (Sec. Sec. 541.300-541.304)
     Sec. 541.300 General rule for professional employees.
       (a) The term ``employee employed in a bona fide 
     professional capacity'' in section 13(a)(1) of the Act shall 
     mean any employee:
       (1) Compensated on a salary or fee basis pursuant to 
     Sec. 541.600 at a rate of not less than $684 per week [(or 
     $455 per week if employed in the Commonwealth of the Northern 
     Mariana Islands, Guam, Puerto Rico, or the U.S. Virgin 
     Islands by employers other than the Federal government, or 
     $380 per week if employed in American Samoa by employers 
     other than the Federal government)], exclusive of board, 
     lodging or other facilities; and
       (2) Whose primary duty is the performance of work:
       (i) Requiring knowledge of an advanced type in a field of 
     science or learning customarily acquired by a prolonged 
     course of specialized intellectual instruction; or
       (ii) Requiring invention, imagination, originality or 
     talent in a recognized field of artistic or creative 
     endeavor.
       (b) The term ``salary basis'' is defined at Sec. 541.602; 
     ``fee basis'' is defined at Sec. 541.605; ``board, lodging or 
     other facilities'' is defined at Sec. 541.606; and ``primary 
     duty'' is defined at Sec. 541.700.
     Sec. 541.301 Learned professionals.
       (a) To qualify for the learned professional exemption, an 
     employee's primary duty must be the performance of work 
     requiring advanced knowledge in a field of science or 
     learning customarily acquired by a prolonged course of 
     specialized intellectual instruction. This primary duty test 
     includes three elements:
       (1) The employee must perform work requiring advanced 
     knowledge;
       (2) The advanced knowledge must be in a field of science or 
     learning; and
       (3) The advanced knowledge must be customarily acquired by 
     a prolonged course of specialized intellectual instruction.
       (b) The phrase ``work requiring advanced knowledge'' means 
     work which is predominantly intellectual in character, and 
     which includes work requiring the consistent exercise of 
     discretion and judgment, as distinguished from performance of 
     routine mental, manual, mechanical or physical work. An 
     employee who performs work requiring advanced knowledge 
     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.
       (c) The phrase ``field of science or learning'' includes 
     the traditional professions of law, medicine, theology, 
     accounting, actuarial computation, engineering, architecture, 
     teaching, various types of physical, chemical and biological 
     sciences, pharmacy and other similar occupations that have a 
     recognized professional status as distinguished from the 
     mechanical arts or skilled trades where in some instances the 
     knowledge is of a fairly advanced type, but is not in a field 
     of science or learning.
       (d) The phrase ``customarily acquired by a prolonged course 
     of specialized intellectual instruction'' restricts the 
     exemption to professions where specialized academic training 
     is a standard prerequisite for entrance into the profession. 
     The best prima facie evidence that an employee meets this 
     requirement is possession of the appropriate academic degree. 
     However, the word ``customarily'' means that the exemption is 
     also 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. Thus, for example, 
     the learned professional exemption is available to the 
     occasional lawyer who has not gone to law school, or the 
     occasional chemist who is not the possessor of a degree in 
     chemistry. However, the learned professional exemption is not 
     available for occupations that customarily may be performed 
     with only the general knowledge acquired by an academic 
     degree in any field, with knowledge acquired through an 
     apprenticeship, or with training in the performance of 
     routine mental, manual, mechanical or physical processes. The 
     learned professional exemption also does not apply to 
     occupations in which most employees have acquired their skill 
     by experience rather than by advanced specialized 
     intellectual instruction.
       (e)(1) Registered or certified medical technologists. 
     Registered or certified medical technologists who have 
     successfully completed three academic years of pre-
     professional study in an accredited college or university 
     plus a fourth year of professional course work in a school of 
     medical technology approved by the Council of Medical 
     Education of the American Medical Association generally meet 
     the duties requirements for the learned professional 
     exemption.
       (2) Nurses. Registered nurses who are registered by the 
     appropriate State examining board generally meet the duties 
     requirements for the learned professional exemption. Licensed 
     practical nurses and other similar health care employees, 
     however, generally do not qualify as exempt learned 
     professionals because possession of a specialized advanced 
     academic degree is not a standard prerequisite for entry into 
     such occupations.
       (3) Dental hygienists. Dental hygienists who have 
     successfully completed four academic years of pre-
     professional and professional study in an accredited college 
     or university approved by the Commission on Accreditation of 
     Dental and Dental Auxiliary Educational Programs of the 
     American Dental Association generally meet the duties 
     requirements for the learned professional exemption.
       (4) Physician assistants. Physician assistants who have 
     successfully completed four academic years of pre-
     professional and professional study, including graduation 
     from a physician assistant program accredited by the 
     Accreditation Review Commission on Education for the 
     Physician Assistant, and who are certified by the National 
     Commission on Certification of Physician Assistants generally 
     meet the duties requirements for the learned professional 
     exemption.
       (5) Accountants. Certified public accountants generally 
     meet the duties requirements for the learned professional 
     exemption. In addition, many other accountants who are not 
     certified public accountants but perform similar job duties 
     may qualify as exempt learned professionals. However, 
     accounting clerks, bookkeepers and other employees who 
     normally perform a great deal of routine work generally will 
     not qualify as exempt professionals.
       (6) Chefs. Chefs, such as executive chefs and sous chefs, 
     who have attained a four-year specialized academic degree in 
     a culinary arts program, generally meet the duties 
     requirements for the learned professional exemption. The 
     learned professional exemption is not available to cooks who 
     perform predominantly routine mental, manual, mechanical or 
     physical work.
       (7) Paralegals. Paralegals and legal assistants generally 
     do not qualify as exempt learned professionals because an 
     advanced specialized academic degree is not a standard 
     prerequisite for entry into the field. Although many 
     paralegals possess general four-year advanced degrees, most 
     specialized paralegal programs are two-year associate degree 
     programs from a community college or equivalent institution. 
     However, the learned professional exemption is available for 
     paralegals who possess advanced specialized degrees in other 
     professional fields and apply advanced knowledge in that 
     field in the performance of their duties. For example, if a 
     law firm hires an engineer as a paralegal to provide expert 
     advice on product liability cases or to assist on patent 
     matters, that engineer would qualify for exemption.
       (8) Athletic trainers. Athletic trainers who have 
     successfully completed four academic years of pre-
     professional and professional study in a specialized 
     curriculum accredited by the Commission on Accreditation of 
     Allied Health Education Programs and who are certified by the 
     Board of Certification of the National Athletic Trainers 
     Association Board of Certification generally meet the duties 
     requirements for the learned professional exemption.
       [(9) Funeral directors or embalmers. Licensed funeral 
     directors and embalmers who are licensed by and working in a 
     state that requires successful completion of four academic 
     years of pre-professional and professional study, including 
     graduation from a

[[Page H4503]]

     college of mortuary science accredited by the American Board 
     of Funeral Service Education, generally meet the duties 
     requirements for the learned professional exemption.]
       (f) The areas in which the professional exemption may be 
     available are expanding. As knowledge is developed, academic 
     training is broadened and specialized degrees are offered in 
     new and diverse fields, thus creating new specialists in 
     particular fields of science or learning. When an advanced 
     specialized degree has become a standard requirement for a 
     particular occupation, that occupation may have acquired the 
     characteristics of a learned profession. Accrediting and 
     certifying organizations similar to those listed in 
     paragraphs (e)(1), (e)(3), (e)(4) and (e)(8) of this section 
     also may be created in the future. Such organizations may 
     develop similar specialized curriculums and certification 
     programs which, if a standard requirement for a particular 
     occupation, may indicate that the occupation has acquired the 
     characteristics of a learned profession.
     Sec. 541.302 Creative professionals.
       (a) To qualify for the creative professional exemption, an 
     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 as opposed 
     to routine mental, manual, mechanical or physical work. The 
     exemption does not apply to work which can be produced by a 
     person with general manual or intellectual ability and 
     training.
       (b) To qualify for exemption as a creative professional, 
     the work performed must be ``in a recognized field of 
     artistic or creative endeavor.'' This includes such fields as 
     music, writing, acting and the graphic arts.
       (c) The requirement of ``invention, imagination, 
     originality or talent'' distinguishes the creative 
     professions from work that primarily depends on intelligence, 
     diligence and accuracy. The duties of employees vary widely, 
     and exemption as a creative professional depends on the 
     extent of the invention, imagination, originality or talent 
     exercised by the employee. Determination of exempt creative 
     professional status, therefore, must be made on a case-by-
     case basis. This requirement generally is met by actors, 
     musicians, composers, conductors, and soloists; painters who 
     at most are given the subject matter of their painting; 
     cartoonists who are merely told the title or underlying 
     concept of a cartoon and must rely on their own creative 
     ability to express the concept; essayists, novelists, short-
     story writers and screen-play writers who choose their own 
     subjects and hand in a finished piece of work to their 
     employers (the majority of such persons are, of course, not 
     employees but self-employed); and persons holding the more 
     responsible writing positions in advertising agencies. This 
     requirement generally is not met by a person who is employed 
     as a copyist, as an ``animator'' of motion-picture cartoons, 
     or as a retoucher of photographs, since such work is not 
     properly described as creative in character.
       (d) Journalists may satisfy the duties requirements for the 
     creative professional exemption if their primary duty is work 
     requiring invention, imagination, originality or talent, as 
     opposed to work which depends primarily on intelligence, 
     diligence and accuracy. Employees of newspapers, magazines, 
     television and other media 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. Thus, for example, newspaper reporters who merely 
     rewrite press releases or who write standard recounts of 
     public information by gathering facts on routine community 
     events are not exempt creative professionals. Reporters also 
     do not qualify as exempt creative professionals if their work 
     product is subject to substantial control by the employer. 
     However, journalists may qualify as exempt creative 
     professionals if their primary duty is performing on the air 
     in radio, television or other electronic media; conducting 
     investigative interviews; analyzing or interpreting public 
     events; writing editorials, opinion columns or other 
     commentary; or acting as a narrator or commentator.
     Sec. 541.303 Teachers.
       (a) The term ``employee employed in a bona fide 
     professional capacity'' in section 13(a)(1) of the Act also 
     means any employee with a primary duty of teaching, tutoring, 
     instructing or lecturing in the activity of imparting 
     knowledge and who is employed and engaged in this activity as 
     a teacher in an educational establishment by which the 
     employee is employed. The term ``educational establishment'' 
     is defined in Sec. 541.204(b).
       (b) Exempt teachers include, but are not limited to: 
     Regular academic teachers; teachers of kindergarten or 
     nursery school pupils; teachers of gifted or disabled 
     children; teachers of skilled and semi-skilled trades and 
     occupations; teachers engaged in automobile driving 
     instruction; aircraft flight instructors; home economics 
     teachers; and vocal or instrumental music instructors. Those 
     faculty members who are engaged as teachers but also spend a 
     considerable amount of their time in extracurricular 
     activities such as coaching athletic teams or acting as 
     moderators or advisors in such areas as drama, speech, debate 
     or journalism are engaged in teaching. Such activities are a 
     recognized part of the schools' responsibility in 
     contributing to the educational development of the student.
       (c) 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.
       (d) The requirements of Sec. 541.300 and Subpart G (salary 
     requirements) of this part do not apply to the teaching 
     professionals described in this section.
     Sec. 541.304 Practice of law or medicine.
       (a) The term ``employee employed in a bona fide 
     professional capacity'' in section 13(a)(1) of the Act also 
     shall mean:
       (1) Any employee who is the holder of a valid license or 
     certificate permitting the practice of law or medicine or any 
     of their branches and is actually engaged in the practice 
     thereof; and
       (2) Any employee who is the holder of the requisite 
     academic degree for the general practice of medicine and is 
     engaged in an internship or resident program pursuant to the 
     practice of the profession.
       (b) In the case of medicine, the exemption applies to 
     physicians and other practitioners licensed and practicing in 
     the field of medical science and healing or any of the 
     medical specialties practiced by physicians or practitioners. 
     The term ``physicians'' includes medical doctors including 
     general practitioners and specialists, osteopathic physicians 
     (doctors of osteopathy), podiatrists, dentists (doctors of 
     dental medicine), and optometrists (doctors of optometry or 
     bachelors of science in optometry).
       (c) Employees engaged in internship or resident programs, 
     whether or not licensed to practice prior to commencement of 
     the program, qualify as exempt professionals if they enter 
     such internship or resident programs after the earning of the 
     appropriate degree required for the general practice of their 
     profession.
       (d) The requirements of Sec. 541.300 and subpart G (salary 
     requirements) of this part do not apply to the employees 
     described in this section.
     SUBPART E--COMPUTER EMPLOYEES (Sec. Sec. 541.400-541.402)
     Sec. 541.400 General rule for computer employees.
       (a) Computer systems analysts, computer programmers, 
     software engineers or other similarly skilled workers in the 
     computer field are eligible for exemption as professionals 
     under section 13(a)(1) of the Act and under section 13(a)(17) 
     of the Act. Because job titles vary widely and change quickly 
     in the computer industry, job titles are not determinative of 
     the applicability of this exemption.
       (b) The section 13(a)(1)exemption applies to any computer 
     employee who is compensated on a salary or fee basis at a 
     rate of not less than $684 per week [(or $455 per week if 
     employed in the Commonwealth of the Northern Mariana Islands, 
     Guam, Puerto Rico, or the U.S. Virgin Islands by employers 
     other than the Federal government, or $380 per week if 
     employed in American Samoa by employers other than the 
     Federal government)], exclusive of board, lodging, or other 
     facilities.
       The section 13(a)(17) exemption applies to any computer 
     employee compensated on an hourly basis at a rate of not less 
     than $27.63 an hour. In addition, under either section 
     13(a)(1) or section 13(a)(17) of the Act, the exemptions 
     apply only to computer employees whose primary duty consists 
     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.
       (c) The term ``salary basis'' is defined at Sec. 541.602; 
     ``fee basis'' is defined at Sec. 541.605; ``board, lodging or 
     other facilities'' is defined at Sec. 541.606; and ``primary 
     duty'' is defined at Sec. 541.700.
     Sec. 541.401 Computer manufacture and repair.
       The exemption for employees in computer occupations 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

[[Page H4504]]

     analysis and programming or other similarly skilled computer-
     related occupations identified in Sec. 541.400(b), are also 
     not exempt computer professionals.
     Sec. 541.402 Executive and administrative computer employees.
       Computer employees within the scope of this exemption, as 
     well as those employees not within its scope, may also have 
     executive and administrative duties which qualify the 
     employees for exemption under subpart B or subpart C of this 
     part. For example, systems analysts and computer programmers 
     generally meet the duties requirements for the administrative 
     exemption if their primary duty includes work such as 
     planning, scheduling, and coordinating activities required to 
     develop systems to solve complex business, scientific or 
     engineering problems of the employer or the employer's 
     customers. Similarly, a senior or lead computer programmer 
     who manages the work of two or more other programmers in a 
     customarily recognized department or subdivision of the 
     employer, and whose recommendations as to the hiring, firing, 
     advancement, promotion or other change of status of the other 
     programmers are given particular weight, generally meets the 
     duties requirements for the executive exemption.
     [SUBPART F--OUTSIDE SALES EMPLOYEES (Sec. Sec. 541.500-
         541.504)
     Sec. 541.500 General rule for outside sales employees.
       (a) The term ``employee employed in the capacity of outside 
     salesman'' in section 13(a)(1) of the Act shall mean any 
     employee:
       (1) Whose primary duty is:
       (i) making sales within the meaning of section 3(k) of the 
     Act, or
       (ii) 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) Who is customarily and regularly engaged away from the 
     employer's place or places of business in performing such 
     primary duty.
       (b) The term ``primary duty'' is defined at Sec. 541.700. 
     In determining the primary duty of an outside sales employee, 
     work performed incidental to and in conjunction with the 
     employee's own outside sales or solicitations, including 
     incidental deliveries and collections, shall be regarded as 
     exempt outside sales work. Other work that furthers the 
     employee's sales efforts also shall be regarded as exempt 
     work including, for example, writing sales reports, updating 
     or revising the employee's sales or display catalogue, 
     planning itineraries and attending sales conferences.
       (c) The requirements of subpart G (salary requirements) of 
     this part do not apply to the outside sales employees 
     described in this section.
     Sec. 541.501 Making sales or obtaining orders.
       (a) Section 541.500 requires that the employee be engaged 
     in:
       (1) Making sales within the meaning of section 3(k) of the 
     Act, or
       (2) Obtaining orders or contracts for services or for the 
     use of facilities.
       (b) Sales within the meaning of section 3(k) of the Act 
     include the transfer of title to tangible property, and in 
     certain cases, of tangible and valuable evidences of 
     intangible property. Section 3(k) of the Act states that 
     ``sale'' or ``sell'' includes any sale, exchange, contract to 
     sell, consignment for sale, shipment for sale, or other 
     disposition.
       (c) Exempt outside sales work includes not only the sales 
     of commodities, but also ``obtaining orders or contracts for 
     services or for the use of facilities for which a 
     consideration will be paid by the client or customer.'' 
     Obtaining orders for ``the use of facilities'' includes the 
     selling of time on radio or television, the solicitation of 
     advertising for newspapers and other periodicals, and the 
     solicitation of freight for railroads and other 
     transportation agencies.
       (d) The word ``services'' extends the outside sales 
     exemption to employees who sell or take orders for a service, 
     which may be performed for the customer by someone other than 
     the person taking the order.
     Sec. 541.502 Away from employer's place of business.
       An outside sales employee must be customarily and regularly 
     engaged ``away from the employer's place or places of 
     business.'' The outside sales employee is an employee who 
     makes sales at the customer's place of business or, if 
     selling door-to-door, at the customer's home. Outside sales 
     does not include sales made by mail, telephone or the 
     Internet unless such contact is used merely as an adjunct to 
     personal calls. Thus, any fixed site, whether home or office, 
     used by a salesperson as a headquarters or for telephonic 
     solicitation of sales is considered one of the employer's 
     places of business, even though the employer is not in any 
     formal sense the owner or tenant of the property. However, an 
     outside sales employee does not lose the exemption by 
     displaying samples in hotel sample rooms during trips from 
     city to city; these sample rooms should not be considered as 
     the employer's places of business. Similarly, an outside 
     sales employee does not lose the exemption by displaying the 
     employer's products at a trade show. If selling actually 
     occurs, rather than just sales promotion, trade shows of 
     short duration (i.e., one or two weeks) should not be 
     considered as the employer's place of business.
     Sec. 541.503 Promotion work.
       (a) Promotion work is one type of activity often performed 
     by persons who make sales, which may or may not be exempt 
     outside sales work, depending upon the circumstances under 
     which it is performed. Promotional work that is actually 
     performed incidental to and in conjunction with an employee's 
     own outside sales or solicitations is exempt work. On the 
     other hand, promotional work that is incidental to sales 
     made, or to be made, by someone else is not exempt outside 
     sales work. An employee who does not satisfy the requirements 
     of this subpart may still qualify as an exempt employee under 
     other subparts of this rule.
       (b) A manufacturer's representative, for example, may 
     perform various types of promotional activities such as 
     putting up displays and posters, removing damaged or spoiled 
     stock from the merchant's shelves or rearranging the 
     merchandise. Such an employee can be considered an exempt 
     outside sales employee if the employee's primary duty is 
     making sales or contracts. Promotion activities directed 
     toward consummation of the employee's own sales are exempt. 
     Promotional activities designed to stimulate sales that will 
     be made by someone else are not exempt outside sales work.
       (c) Another example is a company representative who visits 
     chain stores, arranges the merchandise on shelves, 
     replenishes stock by replacing old with new merchandise, sets 
     up displays and consults with the store manager when 
     inventory runs low, but does not obtain a commitment for 
     additional purchases. The arrangement of merchandise on the 
     shelves or the replenishing of stock is not exempt work 
     unless it is incidental to and in conjunction with the 
     employee's own outside sales. Because the employee in this 
     instance does not consummate the sale nor direct efforts 
     toward the consummation of a sale, the work is not exempt 
     outside sales work.
     Sec. 541.504 Drivers who sell.
       (a) Drivers who deliver products and also sell such 
     products may qualify as exempt outside sales employees only 
     if the employee has a primary duty of making sales. In 
     determining the primary duty of drivers who sell, work 
     performed incidental to and in conjunction with the 
     employee's own outside sales or solicitations, including 
     loading, driving or delivering products, shall be regarded as 
     exempt outside sales work.
       (b) Several factors should be considered in determining if 
     a driver has a primary duty of making sales, including, but 
     not limited to: a comparison of the driver's duties with 
     those of other employees engaged as truck drivers and as 
     salespersons; possession of a selling or solicitor's license 
     when such license is required by law or ordinances; presence 
     or absence of customary or contractual arrangements 
     concerning amounts of products to be delivered; description 
     of the employee's occupation in collective bargaining 
     agreements; the employer's specifications as to 
     qualifications for hiring; sales training; attendance at 
     sales conferences; method of payment; and proportion of 
     earnings directly attributable to sales.
       (c) Drivers who may qualify as exempt outside sales 
     employees include:
       (1) A driver who provides the only sales contact between 
     the employer and the customers visited, who calls on 
     customers and takes orders for products, who delivers 
     products from stock in the employee's vehicle or procures and 
     delivers the product to the customer on a later trip, and who 
     receives compensation commensurate with the volume of 
     products sold.
       (2) A driver who obtains or solicits orders for the 
     employer's products from persons who have authority to commit 
     the customer for purchases.
       (3) A driver who calls on new prospects for customers along 
     the employee's route and attempts to convince them of the 
     desirability of accepting regular delivery of goods.
       (4) A driver who calls on established customers along the 
     route and persuades regular customers to accept delivery of 
     increased amounts of goods or of new products, even though 
     the initial sale or agreement for delivery was made by 
     someone else.
       (d) Drivers who generally would not qualify as exempt 
     outside sales employees include:
       (1) A route driver whose primary duty is to transport 
     products sold by the employer through vending machines and to 
     keep such machines stocked, in good operating condition, and 
     in good locations.
       (2) A driver who often calls on established customers day 
     after day or week after week, delivering a quantity of the 
     employer's products at each call when the sale was not 
     significantly affected by solicitations of the customer by 
     the delivering driver or the amount of the sale is determined 
     by the volume of the customer's sales since the previous 
     delivery.
       (3) A driver primarily engaged in making deliveries to 
     customers and performing activities intended to promote sales 
     by customers (including placing point-of-sale and other 
     advertising materials, price stamping commodities, arranging 
     merchandise on shelves, in coolers or in cabinets, rotating 
     stock according to date, and cleaning and otherwise servicing 
     display cases), unless such work is in furtherance of the 
     driver's own sales efforts.]
     SUBPART G--SALARY REQUIREMENTS (Sec. Sec. 541.600-541.607)
     Sec. 541.600 Amount of salary required.
       (a) To qualify as an exempt executive, administrative or 
     professional employee under

[[Page H4505]]

     section 13(a)(1) of the Act, an employee must be compensated 
     on a salary basis at a rate of not less than $684 per week 
     [(or $455 per week if employed in the Commonwealth of the 
     Northern Mariana Islands, Guam, Puerto Rico, or the U.S. 
     Virgin Islands by employers other than the Federal 
     Government, or $380 per week if employed in American Samoa by 
     employers other than the Federal Government)], exclusive of 
     board, lodging or other facilities. Administrative and 
     professional employees may also be paid on a fee basis, as 
     defined in Sec. 541.605.
       (b) The required amount of compensation per week may be 
     translated into equivalent amounts for periods longer than 
     one week. For example, the $684-per-week requirement will be 
     met if the employee is compensated biweekly on a salary basis 
     of not less than $1,368, semimonthly on a salary basis of not 
     less than $1,482, or monthly on a salary basis of not less 
     than $2,964. However, the shortest period of payment that 
     will meet this compensation requirement is one week.
       (c) In the case of academic administrative employees, the 
     compensation requirement also may be met by compensation on a 
     salary basis at a rate at least equal to the entrance salary 
     for teachers in the educational establishment by which the 
     employee is employed, as provided in Sec. 541.204(a)(1).
       (d) In the case of computer employees, the compensation 
     requirement also may be met by compensation on an hourly 
     basis at a rate not less than $27.63 an hour, as provided in 
     Sec. 541.400(b).
       (e) In the case of professional employees, the compensation 
     requirements in this section shall not apply to employees 
     engaged as teachers (see Sec. 541.303); employees who hold a 
     valid license or certificate permitting the practice of law 
     or medicine or any of their branches and are actually engaged 
     in the practice thereof (see Sec. 541.304); or to employees 
     who hold the requisite academic degree for the general 
     practice of medicine and are engaged in an internship or 
     resident program pursuant to the practice of the profession 
     (see Sec. 541.304). In the case of medical occupations, the 
     exception from the salary or fee requirement does not apply 
     to pharmacists, nurses, therapists, technologists, 
     sanitarians, dietitians, social workers, psychologists, 
     psychometrists, or other professions which service the 
     medical profession.
     SUBPART H--DEFINITIONS AND MISCELLANEOUS PROVISIONS 
         (Sec. Sec. 541.700-541.710)
     Sec. 541.601 Highly compensated employees.
       (a)(1) Beginning on January 1, 2020, an employee with total 
     annual compensation of at least $107,432 is deemed exempt 
     under section 13(a)(1) of the Act if the employee customarily 
     and regularly performs any one or more of the exempt duties 
     or responsibilities of an executive, administrative or 
     professional employee as identified in subparts B, C or D of 
     this part.
       (2) Where the annual period covers periods both prior to 
     and after January 1, 2020, the amount of total annual 
     compensation due will be determined on a proportional basis.
       (b)(1) ``Total annual compensation'' must include at least 
     $684 per week paid on a salary or fee basis as set forth in 
     Sec. Sec. 541.602 and 541.605, except that Sec. 541.602(a)(3) 
     shall not apply to highly compensated employees. Total annual 
     compensation may also include commissions, nondiscretionary 
     bonuses and other nondiscretionary compensation earned during 
     a 52-week period. Total annual compensation does not include 
     board, lodging and other facilities as defined in 
     Sec. 541.606, and does not include payments for medical 
     insurance, payments for life insurance, contributions to 
     retirement plans and the cost of other fringe benefits.
       (2) If an employee's total annual compensation does not 
     total at least the amount specified in the applicable 
     subsection of paragraph (a) by the last pay period of the 52-
     week period, the employer may, during the last pay period or 
     within one month after the end of the 52-week period, make 
     one final payment sufficient to achieve the required level. 
     For example, for a 52-week period beginning January 1, 2020, 
     an employee may earn $90,000 in base salary, and the employer 
     may anticipate based upon past sales that the employee also 
     will earn $17,432 in commissions. However, due to poor sales 
     in the final quarter of the year, the employee actually only 
     earns $12,000 in commissions. In this situation, the employer 
     may within one month after the end of the year make a payment 
     of at least $5,432 to the employee. Any such final payment 
     made after the end of the 52-week period may count only 
     toward the prior year's total annual compensation and not 
     toward the total annual compensation in the year it was paid. 
     If the employer fails to make such a payment, the employee 
     does not qualify as a highly compensated employee, but may 
     still qualify as exempt under subparts B, C, or D of this 
     part.
       (3) An employee who does not work a full year for the 
     employer, either because the employee is newly hired after 
     the beginning of the year or ends the employment before the 
     end of the year, may qualify for exemption under this section 
     if the employee receives a pro rata portion of the minimum 
     amount established in paragraph (a) of this section, based 
     upon the number of weeks that the employee will be or has 
     been employed. An employer may make one final payment as 
     under paragraph (b)(2) of this section within one month after 
     the end of employment.
       (4) The employer may utilize any 52-week period as the 
     year, such as a calendar year, a fiscal year, or an 
     anniversary of hire year. If the employer does not identify 
     some other year period in advance, the calendar year will 
     apply.
       (c) A high level of compensation is a strong indicator of 
     an employee's exempt status, thus eliminating the need for a 
     detailed analysis of the employee's job duties. Thus, a 
     highly compensated employee will qualify for exemption if the 
     employee customarily and regularly performs any one or more 
     of the exempt duties or responsibilities of an executive, 
     administrative or professional employee identified in 
     subparts B, C or D of this part. An employee may qualify as a 
     highly compensated executive employee, for example, if the 
     employee customarily and regularly directs the work of two or 
     more other employees, even though the employee does not meet 
     all of the other requirements for the executive exemption 
     under Sec. 541.100.
       (d) This section applies only to employees whose primary 
     duty includes performing office or non-manual work. Thus, for 
     example, non-management production-line workers and non-
     management employees in maintenance, construction and similar 
     occupations such as carpenters, electricians, mechanics, 
     plumbers, iron workers, craftsmen, operating engineers, 
     longshoremen, construction workers, laborers and other 
     employees who perform work involving repetitive operations 
     with their hands, physical skill and energy are not exempt 
     under this section no matter how highly paid they might be.
     Sec. 541.602 Salary basis.
       (a) General rule. An employee will be considered to be paid 
     on a ``salary basis'' within the meaning of this part if the 
     employee regularly receives each pay period on a weekly, or 
     less frequent basis, a predetermined amount constituting all 
     or part of the employee's compensation, which amount is not 
     subject to reduction because of variations in the quality or 
     quantity of the work performed.
       (1) Subject to the exceptions provided in paragraph (b) of 
     this section, an exempt employee must receive the full salary 
     for any week in which the employee performs any work without 
     regard to the number of days or hours worked. Exempt 
     employees need not be paid for any workweek in which they 
     perform no work.
       (2) An employee is not paid on a salary basis if deductions 
     from the employee's predetermined compensation are made for 
     absences occasioned by the employer or by the operating 
     requirements of the business. If the employee is ready, 
     willing and able to work, deductions may not be made for time 
     when work is not available.
       (3) Up to ten percent of the salary amount required by 
     Sec. 541.600(a) may be satisfied by the payment of 
     nondiscretionary bonuses, incentives and commissions, that 
     are paid annually or more frequently. The employer may 
     utilize any 52-week period as the year, such as a calendar 
     year, a fiscal year, or an anniversary of hire year. If the 
     employer does not identify some other year period in advance, 
     the calendar year will apply. This provision does not apply 
     to highly compensated employees under Sec. 541.601.
       (i) If by the last pay period of the 52-week period the sum 
     of the employee's weekly salary plus nondiscretionary bonus, 
     incentive, and commission payments received is less than 52 
     times the weekly salary amount required by Sec. 541.600(a), 
     the employer may make one final payment sufficient to achieve 
     the required level no later than the next pay period after 
     the end of the year. Any such final payment made after the 
     end of the 52-week period may count only toward the prior 
     year's salary amount and not toward the salary amount in the 
     year it was paid.
       (ii) An employee who does not work a full 52-week period 
     for the employer, either because the employee is newly hired 
     after the beginning of this period or ends the employment 
     before the end of this period, may qualify for exemption if 
     the employee receives a pro rata portion of the minimum 
     amount established in paragraph (a)(3) of this section, based 
     upon the number of weeks that the employee will be or has 
     been employed. An employer may make one final payment as 
     under paragraph (a)(3)(i) of this section within one pay 
     period after the end of employment.
       (b) Exceptions. The prohibition against deductions from pay 
     in the salary basis requirement is subject to the following 
     exceptions:
       (1) Deductions from pay may be made when an exempt employee 
     is absent from work for one or more full days for personal 
     reasons, other than sickness or disability. Thus, if an 
     employee is absent for two full days to handle personal 
     affairs, the employee's salaried status will not be affected 
     if deductions are made from the salary for two full-day 
     absences. However, if an exempt employee is absent for one 
     and a half days for personal reasons, the employer can deduct 
     only for the one full-day absence.
       (2) Deductions from pay may be made for absences of one or 
     more full days occasioned by sickness or disability 
     (including work-related accidents) if the deduction is made 
     in accordance with a bona fide plan, policy or practice of 
     providing compensation for loss of salary occasioned by such 
     sickness or disability. The employer is not required to pay 
     any portion of the employee's salary for full-day absences 
     for which the employee receives compensation under the plan, 
     policy or practice. Deductions for such full-day absences 
     also may be made before the employee has qualified under the 
     plan, policy or

[[Page H4506]]

     practice, and after the employee has exhausted the leave 
     allowance thereunder. Thus, for example, if an employer 
     maintains a short-term disability insurance plan providing 
     salary replacement for 12 weeks starting on the fourth day of 
     absence, the employer may make deductions from pay for the 
     three days of absence before the employee qualifies for 
     benefits under the plan; for the twelve weeks in which the 
     employee receives salary replacement benefits under the plan; 
     and for absences after the employee has exhausted the 12 
     weeks of salary replacement benefits. Similarly, an employer 
     may make deductions from pay for absences of one or more full 
     days if salary replacement benefits are provided under a 
     State disability insurance law or under a State workers' 
     compensation law.
       (3) While an employer cannot make deductions from pay for 
     absences of an exempt employee occasioned by jury duty, 
     attendance as a witness or temporary military leave, the 
     employer can offset any amounts received by an employee as 
     jury fees, witness fees or military pay for a particular week 
     against the salary due for that particular week without loss 
     of the exemption.
       (4) Deductions from pay of exempt employees may be made for 
     penalties imposed in good faith for infractions of safety 
     rules of major significance. Safety rules of major 
     significance include those relating to the prevention of 
     serious danger in the workplace or to other employees, such 
     as rules prohibiting smoking in explosive plants, oil 
     refineries and coal mines.
       (5) Deductions from pay of exempt employees may be made for 
     unpaid disciplinary suspensions of one or more full days 
     imposed in good faith for infractions of workplace conduct 
     rules. Such suspensions must be imposed pursuant to a written 
     policy applicable to all employees. Thus, for example, an 
     employer may suspend an exempt employee without pay for three 
     days for violating a generally applicable written policy 
     prohibiting sexual harassment. Similarly, an employer may 
     suspend an exempt employee without pay for twelve days for 
     violating a generally applicable written policy prohibiting 
     workplace violence.
       (6) An employer is not required to pay the full salary in 
     the initial or terminal week of employment. Rather, an 
     employer may pay a proportionate part of an employee's full 
     salary for the time actually worked in the first and last 
     week of employment. In such weeks, the payment of an hourly 
     or daily equivalent of the employee's full salary for the 
     time actually worked will meet the requirement. However, 
     employees are not paid on a salary basis within the meaning 
     of these regulations if they are employed occasionally for a 
     few days, and the employer pays them a proportionate part of 
     the weekly salary when so employed.
       (7) An employer is not required to pay the full salary for 
     weeks in which an exempt employee takes unpaid leave under 
     the Family and Medical Leave Act. Rather, when an exempt 
     employee takes unpaid leave under the Family and Medical 
     Leave Act, an employer may pay a proportionate part of the 
     full salary for time actually worked. For example, if an 
     employee who normally works 40 hours per week uses four hours 
     of unpaid leave under the Family and Medical Leave Act, the 
     employer could deduct 10 percent of the employee's normal 
     salary that week.
       (c) When calculating the amount of a deduction from pay 
     allowed under paragraph (b) of this section, the employer may 
     use the hourly or daily equivalent of the employee's full 
     weekly salary or any other amount proportional to the time 
     actually missed by the employee. A deduction from pay as a 
     penalty for violations of major safety rules under paragraph 
     (b)(4) of this section may be made in any amount.
     Sec. 541.603 Effect of improper deductions from salary.
       (a) An employer who makes improper deductions from salary 
     shall lose the exemption if the facts demonstrate that the 
     employer did not intend to pay employees on a salary basis. 
     An actual practice of making improper deductions demonstrates 
     that the employer did not intend to pay employees on a salary 
     basis. The 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 discipline; the time period 
     during which the employer made improper deductions; the 
     number and geographic location of employees whose salary was 
     improperly reduced; the number and geographic location of 
     managers responsible for taking the improper deductions; and 
     whether the employer has a clearly communicated policy 
     permitting or prohibiting improper deductions.
       (b) If the facts demonstrate that the employer has an 
     actual practice of making improper deductions, 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. Thus, for example, if 
     a manager at a company facility routinely docks the pay of 
     engineers at that facility for partial-day personal absences, 
     then all engineers at that facility whose pay could have been 
     improperly docked by the manager would lose the exemption; 
     engineers at other facilities or working for other managers, 
     however, would remain exempt.
       (c) Improper deductions that are either isolated or 
     inadvertent will not result in loss of the exemption for any 
     employees subject to such improper deductions, if the 
     employer reimburses the employees for such improper 
     deductions.
       (d) If an employer has a clearly communicated policy that 
     prohibits the improper pay deductions specified in 
     Sec. 541.602(a) and includes a complaint mechanism, 
     reimburses employees for any improper deductions and makes a 
     good faith commitment to comply in the future, such employer 
     will not lose the exemption for any employees unless the 
     employer willfully violates the policy by continuing to make 
     improper deductions after receiving employee complaints. If 
     an employer fails to reimburse employees for any improper 
     deductions or continues to make improper deductions after 
     receiving employee complaints, 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. 
     The best evidence of a clearly communicated policy is a 
     written policy that was distributed to employees prior to the 
     improper pay deductions by, for example, providing a copy of 
     the policy to employees at the time of hire, publishing the 
     policy in an employee handbook or publishing the policy on 
     the employer's Intranet.
       (e) This section shall not be construed in an unduly 
     technical manner so as to defeat the exemption.
     Sec. 541.604 Minimum guarantee plus extras.
       (a) An employer may provide an exempt employee with 
     additional compensation without losing the exemption or 
     violating the salary basis requirement, if the employment 
     arrangement also includes a guarantee of at least the minimum 
     weekly-required amount paid on a salary basis. Thus, for 
     example, an exempt employee guaranteed at least $684 each 
     week paid on a salary basis may also receive additional 
     compensation of a one percent commission on sales. An exempt 
     employee also may receive a percentage of the sales or 
     profits of the employer if the employment arrangement also 
     includes a guarantee of at least $684 each week paid on a 
     salary basis. Similarly, the exemption is not lost if an 
     exempt employee who is guaranteed at least $684 each week 
     paid on a salary basis also receives additional compensation 
     based on hours worked for work beyond the normal workweek. 
     Such additional compensation may be paid on any basis (e.g., 
     flat sum, bonus payment, straight-time hourly amount, time 
     and one-half or any other basis), and may include paid time 
     off.
       (b) An exempt employee's earnings may be computed on an 
     hourly, a daily or a shift basis, without losing the 
     exemption or violating the salary basis requirement, if the 
     employment arrangement also includes a guarantee of at least 
     the minimum weekly required amount paid on a salary basis 
     regardless of the number of hours, days or shifts worked, and 
     a reasonable relationship exists between the guaranteed 
     amount and the amount actually earned. The reasonable 
     relationship test will be met if the weekly guarantee is 
     roughly equivalent to the employee's usual earnings at the 
     assigned hourly, daily or shift rate for the employee's 
     normal scheduled workweek. Thus, for example, an exempt 
     employee guaranteed compensation of at least $725 for any 
     week in which the employee performs any work, and who 
     normally works four or five shifts each week, may be paid 
     $210 per shift without violating the $684-per-week salary 
     basis requirement. The reasonable relationship requirement 
     applies only if the employee's pay is computed on an hourly, 
     daily or shift basis. It does not apply, for example, to an 
     exempt store manager paid a guaranteed salary per week that 
     exceeds the current salary level who also receives a 
     commission of one-half percent of all sales in the store or 
     five percent of the store's profits, which in some weeks may 
     total as much as, or even more than, the guaranteed salary.
     Sec. 541.605 Fee basis.
       (a) Administrative and professional employees may be paid 
     on a fee basis, rather than on a salary basis. An employee 
     will be considered to be paid on a ``fee basis'' within the 
     meaning of these regulations if the employee is paid an 
     agreed sum for a single job regardless of the time required 
     for its completion. These payments resemble piecework 
     payments with the important distinction that generally a 
     ``fee'' is paid for the kind of job that is unique rather 
     than for a series of jobs repeated an indefinite number of 
     times and for which payment on an identical basis is made 
     over and over again. Payments based on the number of hours or 
     days worked and not on the accomplishment of a given single 
     task are not considered payments on a fee basis.
       (b) To determine whether the fee payment meets the minimum 
     amount of salary required for exemption under these 
     regulations, the amount paid to the employee will be tested 
     by determining the time worked on the job and whether the fee 
     payment is at a rate that would amount to at least the 
     minimum salary per week, as required by Sec. Sec. 541.600(a) 
     and 541.602(a), if the employee worked 40 hours. Thus, an 
     artist paid $350 for a picture that took 20 hours to complete 
     meets the $684 minimum salary requirement for exemption since 
     earnings at this rate would yield the artist $700 if 40 hours 
     were worked.

[[Page H4507]]

  

     Sec. 541.606 Board, lodging or other facilities.
       (a) To qualify for exemption under section 13(a)(1) of the 
     Act, an employee must earn the minimum salary amount set 
     forth in Sec. 541.600, ``exclusive of board, lodging or other 
     facilities.'' The phrase ``exclusive of board, lodging or 
     other facilities'' means ``free and clear'' or independent of 
     any claimed credit for non-cash items of value that an 
     employer may provide to an employee. Thus, 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 under this part 541. 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.
       (b) Regulations defining what constitutes ``board, lodging, 
     or other facilities'' are contained in 29 CFR part 531 
     <>. [As described in 29 CFR 
     531.32, the term ``other facilities'' refers to items similar 
     to board and lodging, such as meals furnished at company 
     restaurants or cafeterias or by hospitals, hotels, or 
     restaurants to their employees; meals, dormitory rooms, and 
     tuition furnished by a college to its student employees; 
     merchandise furnished at company stores or commissaries, 
     including articles of food, clothing, and household effects; 
     housing furnished for dwelling purposes; and transportation 
     furnished to employees for ordinary commuting between their 
     homes and work.]
     [Sec. 541.607] [Reserved by 85 FR 34970 Effective: June 8, 
         2020]
     Sec. 541.700 Primary duty.
       (a) To qualify for exemption under this part, an employee's 
     ``primary duty'' must be the performance of exempt work. The 
     term ``primary duty'' means 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. Factors to 
     consider when determining the primary duty of an employee 
     include, but are not limited to, the relative importance of 
     the exempt duties as compared with other types of duties; the 
     amount of time spent performing exempt work; the employee's 
     relative freedom from direct supervision; and the 
     relationship between the employee's salary and the wages paid 
     to other employees for the kind of nonexempt work performed 
     by the employee.
       (b) The amount of time spent performing exempt work can be 
     a useful guide in determining whether exempt work is the 
     primary duty of an employee. Thus, employees who spend more 
     than 50 percent of their time performing exempt work will 
     generally satisfy the primary duty requirement. Time alone, 
     however, is not the sole test, and nothing in this section 
     requires that exempt employees spend more than 50 percent of 
     their time performing exempt work. Employees who do not spend 
     more than 50 percent of their time performing exempt duties 
     may nonetheless meet the primary duty requirement if the 
     other factors support such a conclusion.
       (c) Thus, for example, assistant managers in a retail 
     establishment who perform exempt executive work such as 
     supervising and directing the work of other employees, 
     ordering merchandise, managing the budget and authorizing 
     payment of bills may have management as their primary duty 
     even if the assistant managers spend more than 50 percent of 
     the time performing nonexempt work such as running the cash 
     register. However, if such assistant managers are closely 
     supervised and earn little more than the nonexempt employees, 
     the assistant managers generally would not satisfy the 
     primary duty requirement.
     Sec. 541.701 Customarily and regularly.
       The phrase ``customarily and regularly'' means a frequency 
     that must be greater than occasional but which, of course, 
     may be less than constant. Tasks or work performed 
     ``customarily and regularly'' includes work normally and 
     recurrently performed every workweek; it does not include 
     isolated or one-time tasks.
     Sec. 541.702 Exempt and nonexempt work.
       The term ``exempt work'' means all work described in 
     Sec. Sec. 541.100, 541.101, 541.200, 541.300, 541.301, 
     541.302, 541.303, 541.304, <> 541.400 [and 541.500], and 
     the activities directly and closely related to such work. All 
     other work is considered ``nonexempt.''
     Sec. 541.703 Directly and closely related.
       (a) Work that is ``directly and closely related'' to the 
     performance of exempt work is also considered exempt work. 
     The phrase ``directly and closely related'' means tasks that 
     are related to exempt duties and that contribute to or 
     facilitate performance of exempt work. Thus, ``directly and 
     closely related'' work may include physical tasks and menial 
     tasks that arise out of exempt duties, and the routine work 
     without which the exempt employee's exempt work cannot be 
     performed properly. Work ``directly and closely related'' to 
     the performance of exempt duties may also include 
     recordkeeping; monitoring and adjusting machinery; taking 
     notes; using the computer to create documents or 
     presentations; opening the mail for the purpose of reading it 
     and making decisions; and using a photocopier or fax machine. 
     Work is not ``directly and closely related'' if the work is 
     remotely related or completely unrelated to exempt duties.
       (b) The following examples further illustrate the type of 
     work that is and is not normally considered as directly and 
     closely related to exempt work:
       (1) Keeping time, production or sales records for 
     subordinates is work directly and closely related to an 
     exempt executive's function of managing a department and 
     supervising employees.
       (2) The distribution of materials, merchandise or supplies 
     to maintain control of the flow of and expenditures for such 
     items is directly and closely related to the performance of 
     exempt duties.
       (3) A supervisor who spot checks and examines the work of 
     subordinates to determine whether they are performing their 
     duties properly, and whether the product is satisfactory, is 
     performing work which is directly and closely related to 
     managerial and supervisory functions, so long as the checking 
     is distinguishable from the work ordinarily performed by a 
     nonexempt inspector.
       (4) A supervisor who sets up a machine may be engaged in 
     exempt work, depending upon the nature of the industry and 
     the operation. In some cases the setup work, or adjustment of 
     the machine for a particular job, is typically performed by 
     the same employees who operate the machine. Such setup work 
     is part of the production operation and is not exempt. In 
     other cases, the setting up of the work is a highly skilled 
     operation which the ordinary production worker or machine 
     tender typically does not perform. In large plants, non-
     supervisors may perform such work. However, particularly in 
     small plants, such work may be a regular duty of the 
     executive and is directly and closely related to the 
     executive's responsibility for the work performance of 
     subordinates and for the adequacy of the final product. Under 
     such circumstances, it is exempt work.
       (5) A department manager in a retail or service 
     establishment who walks about the sales floor observing the 
     work of sales personnel under the employee's supervision to 
     determine the effectiveness of their sales techniques, checks 
     on the quality of customer service being given, or observes 
     customer preferences is performing work which is directly and 
     closely related to managerial and supervisory functions.
       (6) A business consultant may take extensive notes 
     recording the flow of work and materials through the office 
     or plant of the client; after returning to the office of the 
     employer, the consultant may personally use the computer to 
     type a report and create a proposed table of organization. 
     Standing alone, or separated from the primary duty, such 
     note-taking and typing would be routine in nature. However, 
     because this work is necessary for analyzing the data and 
     making recommendations, the work is directly and closely 
     related to exempt work. While it is possible to assign note-
     taking and typing to nonexempt employees, and in fact it is 
     frequently the practice to do so, delegating such routine 
     tasks is not required as a condition of exemption.
       (7) A credit manager who makes and administers the credit 
     policy of the employer, establishes credit limits for 
     customers, authorizes the shipment of orders on credit, and 
     makes decisions on whether to exceed credit limits would be 
     performing work exempt under Sec. 541.200. Work that is 
     directly and closely related to these exempt duties may 
     include checking the status of accounts to determine whether 
     the credit limit would be exceeded by the shipment of a new 
     order, removing credit reports from the files for analysis, 
     and writing letters giving credit data and experience to 
     other employers or credit agencies.
       (8) A traffic manager in charge of planning a company's 
     transportation, including the most economical and quickest 
     routes for shipping merchandise to and from the plant, 
     contracting for common-carrier and other transportation 
     facilities, negotiating with carriers for adjustments for 
     damages to merchandise, and making the necessary 
     rearrangements resulting from delays, damages or 
     irregularities in transit, is performing exempt work. If the 
     employee also spends part of the day taking telephone orders 
     for local deliveries, such order-taking is a routine function 
     and is not directly and closely related to the exempt work.
       (9) An example of work directly and closely related to 
     exempt professional duties is a chemist performing menial 
     tasks such as cleaning a test tube in the middle of an 
     original experiment, even though such menial tasks can be 
     assigned to laboratory assistants.
       (10) A teacher performs work directly and closely related 
     to exempt duties when, while taking students on a field trip, 
     the teacher drives a school van or monitors the students' 
     behavior in a restaurant.
     Sec. 541.704 Use of manuals.
       The use of manuals, guidelines or other established 
     procedures containing or relating to highly technical, 
     scientific, legal, financial or other similarly complex 
     matters that can be understood or interpreted only by those 
     with advanced or specialized knowledge or skills does not 
     preclude exemption under section 13(a)(1) of the Act or the 
     regulations in this part. Such manuals and procedures provide 
     guidance in addressing difficult or novel circumstances and 
     thus use of such reference material would not affect an 
     employee's exempt status. The section 13(a)(1) exemptions are 
     not available, however, for employees who simply apply well-
     established techniques or procedures described in manuals or 
     other sources within

[[Page H4508]]

     closely prescribed limits to determine the correct response 
     to an inquiry or set of circumstances.
     Sec. 541.705 Trainees.
       The executive, administrative, professional, [outside 
     sales] and computer employee exemptions do not apply to 
     employees training for employment in an executive, 
     administrative, professional, [outside sales] or computer 
     employee capacity who are not actually performing the duties 
     of an executive, administrative, professional, [outside 
     sales] or computer employee.
     Sec. 541.706 Emergencies.
       (a) An exempt employee will not lose the exemption by 
     performing work of a normally nonexempt nature because of the 
     existence of an emergency. Thus, when emergencies arise that 
     threaten the safety of employees, a cessation of operations 
     or serious damage to the employer's property, any work 
     performed in an effort to prevent such results is considered 
     exempt work.
       (b) An ``emergency'' does not include occurrences that are 
     not beyond control or for which the employer can reasonably 
     provide in the normal course of business. Emergencies 
     generally occur only rarely, and are events that the employer 
     cannot reasonably anticipate.
       (c) The following examples illustrate the distinction 
     between emergency work considered exempt work and routine 
     work that is not exempt work:
       (1) A mine superintendent who pitches in after an explosion 
     and digs out workers who are trapped in the mine is still a 
     bona fide executive.
       (2) Assisting nonexempt employees with their work during 
     periods of heavy workload or to handle rush orders is not 
     exempt work.
       (3) Replacing a nonexempt employee during the first day or 
     partial day of an illness may be considered exempt emergency 
     work depending on factors such as the size of the 
     establishment and of the executive's department, the nature 
     of the industry, the consequences that would flow from the 
     failure to replace the ailing employee immediately, and the 
     feasibility of filling the employee's place promptly.
       (4) Regular repair and cleaning of equipment is not 
     emergency work, even when necessary to prevent fire or 
     explosion; however, repairing equipment may be emergency work 
     if the breakdown of or damage to the equipment was caused by 
     accident or carelessness that the employer could not 
     reasonably anticipate.
     Sec. 541.707 Occasional tasks.
       Occasional, infrequently recurring tasks that cannot 
     practicably be performed by nonexempt employees, but are the 
     means for an exempt employee to properly carry out exempt 
     functions and responsibilities, are considered exempt work. 
     The following factors should be considered in determining 
     whether such work is exempt work: Whether the same work is 
     performed by any of the exempt employee's subordinates; 
     practicability of delegating the work to a nonexempt 
     employee; whether the exempt employee performs the task 
     frequently or occasionally; and existence of an industry 
     practice for the exempt employee to perform the task.
     Sec. 541.708 Combination exemptions.
       Employees who perform a combination of exempt duties as set 
     forth in the regulations in this part for executive, 
     administrative, professional, [outside sales] and computer 
     employees may qualify for exemption. Thus, for example, an 
     employee whose primary duty involves a combination of exempt 
     administrative and exempt executive work may qualify for 
     exemption. In other words, work that is exempt under one 
     section of this part will not defeat the exemption under any 
     other section.
     [Sec. 541.709 Motion picture producing industry.
       The requirement that the employee be paid ``on a salary 
     basis'' does not apply to an employee in the motion picture 
     producing industry who is compensated at a base rate of at 
     least $1,043 per week (exclusive of board, lodging, or other 
     facilities). Thus, an employee in this industry who is 
     otherwise exempt under subparts B, C, or D of this part, and 
     who is employed at a base rate of at least the applicable 
     current minimum amount a week is exempt if paid a 
     proportionate amount (based on a week of not more than 6 
     days) for any week in which the employee does not work a full 
     workweek for any reason. Moreover, an otherwise exempt 
     employee in this industry qualifies for exemption if the 
     employee is employed at a daily rate under the following 
     circumstances:
       (a) The employee is in a job category for which a weekly 
     base rate is not provided and the daily base rate would yield 
     at least the minimum weekly amount if 6 days were worked; or
       (b) The employee is in a job category having the minimum 
     weekly base rate and the daily base rate is at least one-
     sixth of such weekly base rate.]
     Sec. 541.710 Employees of public agencies.
       (a) An employee of a public agency who otherwise meets the 
     salary basis requirements of Sec. 541.602 shall not be 
     disqualified from exemption under Sec. Sec. 541.100, 541.200, 
     541.300 or 541.400 on the basis that such employee is paid 
     according to a pay system established by statute, ordinance 
     or regulation, or by a policy or practice established 
     pursuant to principles of public accountability, under which 
     the employee accrues personal leave and sick leave and which 
     requires the public agency employee's pay to be reduced or 
     such employee to be placed on leave without pay for absences 
     for personal reasons or because of illness or injury of less 
     than one work-day when accrued leave is not used by an 
     employee because:
       (1) Permission for its use has not been sought or has been 
     sought and denied;
       (2) Accrued leave has been exhausted; or
       (3) The employee chooses to use leave without pay.
       (b) Deductions from the pay of an employee of a public 
     agency for absences due to a budget-required furlough shall 
     not disqualify the employee from being paid on a salary basis 
     except in the workweek in which the furlough occurs and for 
     which the employee's pay is accordingly reduced.

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