To be exempt, executive, administrative, and professional employees must also be paid salaries. Employees must be paid at least $455/week to qualify for any of the white-collar exemptions. Pay of more than $100,000/year creates a presumption of exempt status. At this minimum salary level, an employee who earns as little as $23,660 per year could still be exempt. In 2016, the DOL attempted to increase the minimum salary level required to be exempt to $913/week.

Some business organizations and state governments challenged the new regulation, and a district court eventually ruled that DOL had exceeded its authority by increasing the minimum salary level so substantially. Salary level is not the only relevant consideration. Sometimes, a question arises about whether the method of payment, regardless of the amount, is truly a salary. A salary can be contrasted with an hourly wage, in which pay is closely calibrated to time put in, or with a piece-rate system, in which pay is directly based on the volume of output.

A salary is a pre-specified sum that an employee is paid for the responsibilities associated with a position. The amount of time needed and the quality or quantity of work will likely vary from week to week and are not the bases for payment. Employers certainly benefit when salaried, exempt employees put in long hours for no extra pay. If employees are not paid on a salary basis, they are not exempt from the FLSA’s requirements, regardless of how obviously executive, administrative, or professional their duties.

This approach to determining whether employees are paid on a salary basis is known as the DOL’s pay docking rule. Under the pay docking rule, exempt employees must receive predetermined amounts of pay not subject to reduction due to variations in the quantity or quality of work performed. Employers cannot reduce pay for partial-day absences for personal reasons, for time missed due to jury duty or temporary military leave, or for temporary business closing when they employee would be able to work.

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