WAGE AND HOUR DIVISION
UNITED STATES DEPARTMENT OF LABOR

Guidance for Private Employers
on Changes to the White Collar Exemptions
in the Overtime Final Rule
May 18, 2016

Introduction
The Department of Labor’s (“Department”) Final
Rule on Defining and Delimiting the Exemptions for
Executive, Administrative, Professional, Outside
Sales and Computer Employees under the Fair
Labor Standards Act (FLSA) (the “Overtime Rule”
or “Final Rule”) updates the salary level required
for the executive, administrative, and professional
(“white collar”) exemption to ensure that the FLSA’s
intended overtime protections are fully implemented,
and to simplify the identification of overtime-exempt
employees. The Final Rule strengthens overtime
protections and provides greater clarity for workers
and employers across a wide range of sectors.
Employers, however, are not required to pay minimum
wages or overtime to executive, administrative, and
professional employees who satisfy the salary level
and other requirements to meet one of the white collar
exemptions. The Department is issuing this guidance
on the application of the white collar exemptions at
the same time as publication of the Final Rule in order
to help private sector employers evaluate current
practices and transition to the requirements of the
Final Rule.
In the Final Rule, the Department updated the salary
level above which certain “white collar” workers may

be exempt from overtime pay requirements to equal the
40th percentile of earnings of full-time salaried workers
from the lowest wage Census Region. This change raises
the salary level from its previous amount of $455 per
week (the equivalent of $23,660 per year) to a new
level of $913 per week (the equivalent of $47,476 per
year). Salaried white collar employees paid below the
updated salary level are generally entitled to overtime
pay, while employees paid at or above the salary level
may be exempt from overtime pay if they primarily
perform certain duties. The Final Rule also raises the
compensation level for highly compensated employees
subject to a more minimal duties test from its previous
amount of $100,000 to $134,004 annually. These
changes take effect on December 1, 2016. The Final
Rule also establishes a mechanism for automatically
updating the salary and compensation levels every
three years, with the first update to take place in 2020.
The Final Rule does not include any changes to the
duties tests, which also affect the determination of who
is exempt from overtime.
In view of the changes introduced by the Final Rule
to the salary level in particular, the Department is
providing this guidance to assist employers in preparing
for implementation of the Final Rule. Part I of this
guidance provides a brief background on the FLSA’s
white collar exemptions and how they apply generally.

  2. Guidance for Private Employers on Changes to the White Collar Exemptions in the Overtime Final Rule

Part II details some of the options employers may
exercise in determining how best for their organizations
to ensure that they comply with the Final Rule. This
guidance, however, is not a comprehensive guide
to coverage and compliance under the FLSA. For
additional, detailed guidance documents, please visit the
Wage and Hour Division’s website at dol.gov/whd.

I. Considerations for Applying the White
Collar Exemptions
A review of the baseline white collar exemption
requirements will help clarify what has changed as a
result of the Final Rule. In the Final Rule, among other
things, the Department updated the salary level from
its previous amount of $455 per week (the equivalent
of $23,660 per year) to $913 per week (the equivalent
of $47,476 per year). The salary level is one of three
tests for determining whether employees employed as
executive, administrative, or professional employees are
exempt from the FLSA’s minimum wage and overtime
requirements. See 29 U.S.C. 213(a)(1); 29 CFR Part
541. These exemptions are sometimes referred to
collectively as the “white collar” exemptions. The Final
Rule also made changes to the highly compensated
employee exemption and how bonuses are treated
for purposes of determining an employee’s exempt
status. For guidance on these issues or for additional
information on the Final Rule visit dol.gov/whd/
overtime/final2016/.
Establishing that a white collar employee is exempt from
the FLSA’s minimum wage and overtime requirements
involves assessing how the employee is paid (salary
basis test), how much the employee earns (salary level
test), and whether the employee primarily performs
the kind of job duties that Congress meant to exclude
from the law’s overtime protections (duties test). Job
titles never determine exempt status under the FLSA.
Additionally, receiving a particular salary, alone, does
not indicate that an employee is exempt from overtime
and minimum wage protections. Rather, in order for a
white collar exemption to apply, an employee’s specific
job duties and earnings must meet all of the applicable
requirements provided in the regulations. Not all
salaried white collar employees qualify for the white
collar exemptions; in fact, many salaried white collar
employees are entitled to minimum wage and overtime.

A.

Three Tests Must Be Met in Order to Claim
a White Collar Exemption

The regulations implementing the white collar
exemptions generally require individuals to satisfy three
criteria to be exempt from overtime requirements:
• First, they must be paid on a salary basis not
subject to reduction based on quality or quantity of
work (“salary basis test”) rather than, for example,
on an hourly basis;
• Second, their salary must meet a minimum salary
level, which after the effective date of the Final
Rule will be $913 per week, which is equivalent
to $47,476 annually for a full-year worker (“salary
level test”); and
• Third, the employee’s primary job duty must involve
the kind of work associated with exempt executive,
administrative, or professional employees (the
“standard duties test”).
The salary level is not a minimum wage requirement,
and no employer is required to pay an employee the
salary specified in the regulations, unless the employer
is claiming an applicable white collar exemption.
Administrative and professional employees may also
be paid on a “fee basis.” See 29 CFR 541.605. For
additional information about payment on a fee basis, see

Job titles never determine
exempt status under the
FLSA. Additionally, receiving
a particular salary, alone,
does not indicate that an
employee is exempt from
overtime and minimum
wage protections.

 United States Department of Labor 3.

Overtime-eligible employees may be paid a salary and
do not need to be paid on an hourly basis. That is,
salaried workers may be eligible for overtime.

WHD Fact Sheet 17G.
Note that the discussion in this guidance focuses on the
standard exemption. For additional information on the
highly compensated employee exemption, which pairs a
more relaxed duties test with a higher total earnings level
($134,004 per year, beginning on December 1, 2016),
see WHD Fact Sheet 17H.
B.

Primary Job Duties for Exempt Executive,
Administrative, and Professional
Employees

The duties tests remain unchanged under the Final Rule.
These tests are summarized below.
Professional Exemption. There are several different
kinds of exempt “professional” employees. These
include “learned professionals,” “creative professionals,”
teachers, and employees practicing law or medicine.
Under the Final Rule, exempt professional employees
must receive at least $913 a week (the equivalent of
$47,476 a year) on a salary or fee basis (compared
to $455 a week under the old rule), and must
primarily perform work that either requires advanced
knowledge in a field of science or learning, usually
obtained through a degree, or that requires invention,
imagination, originality, or talent in a recognized field of
artistic or creative endeavor.
Many businesses may employ certain professionals
who will be unaffected by the new salary level.
Specifically, the salary level and salary basis
requirements do not apply to teachers, lawyers, or
doctors (“bona fide practitioners of law or medicine”).
See WHD Fact Sheet 17D.
Example: A business hires an attorney with a law
degree to work in its General Counsel’s office. The

attorney performs legal work for the business. The
attorney is a bona fide professional, exempt from
the FLSA’s provisions, regardless of whether she is
paid on a salary basis or meets the salary level.
Administrative Exemption. To qualify for the
administrative exemption, an employee must receive at
least $913 a week (the equivalent of $47,476 a year) on
a salary or fee basis, and the employee’s primary duty
must be the performance of office or non-manual work
directly related to the management or general business
operations of the employer or the employer’s customers.
Additionally, the employee’s primary duty must include
the exercise of discretion and independent judgment
with respect to matters of significance. See 29 CFR
541.203 for examples, and WHD Fact Sheet 17C for
additional information.
Executive Exemption. To qualify for the executive
exemption, an employee must receive compensation
on a salary basis of not less than $913 per week (the
equivalent of $47,476 a year), and have the primary
duty of managing the enterprise, or managing a
customarily recognized department or subdivision
of the enterprise. Additionally, the employee must
customarily and regularly direct the work of at least
two other full-time employees or their equivalent (for
example, one full-time and two half-time employees
are equivalent to two full-time employees), and have
the authority to hire or fire other employees, or the
employee’s suggestions and recommendations as to the
hiring, firing, advancement, promotion, or any other
change of status of other employees must be given
particular weight. See WHD Fact Sheet 17B.
Example: A maintenance department, which is
responsible for maintaining the buildings and
grounds of a large technology company, employs
a groundskeeping crew lead. The crew lead
coordinates the work of three groundskeepers and

  4. Guidance for Private Employers on Changes to the White Collar Exemptions in the Overtime Final Rule

The salary level is
not a minimum wage
requirement, and no
employer is required to
pay an employee the salary
specified in the regulations,
unless the employer is
claiming an applicable white
collar exemption.

makes recommendations for their terminations and
promotions. The crew lead earns $38,000 a year
($731 per week) on a salary basis. The crew lead
does not meet the new salary level, and therefore is
eligible for overtime compensation when the crew
lead works more than 40 hours a week. The facility
does not need to determine whether the crew lead
meets the duties test, because the crew lead does
not pass the salary test.
For more information on all of the white collar
exemptions, see WHD Fact Sheet 17A: Exemption for
Executive, Administrative, Professional, Computer
& Outside Sales Employees under the Fair Labor
Standards Act (FLSA).

II. Options for Compliance for Employers
Who Might be Impacted by the Final Rule
Employers have a wide range of options for
responding to the changes to the salary level, and
the Department does not dictate or recommend any
method. Organizations may ensure compliance for
those employees affected by the Final Rule in a number

Basic Requirements for Claiming a
White Collar Exemption under the Standard Duties Test
EXECUTIVE

ADMINISTRATIVE

PROFESSIONAL

Salary Basis Test

• Employee must be paid on a
salary basis

•  Employee must be paid on a
salary or fee basis

•  Employee must be paid on a
salary or fee basis

Standard Salary Level Test

• $913 per week
 ($47,476 per year for a full-year
worker)

•   $913 per week ($47,476 per
year for a full-year worker)

•  $913 per week ($47,476 per
year for a full-year worker)

•  Special salary level for certain
academic administrative
personnel

•  Salary level test does not apply
to doctors, lawyers, or teachers

•  T he employee’s “primary duty”
must include the exercise of
discretion and independent
judgment with respect to
matters of significance.

•  T he employee’s “primary duty”
must be to primarily perform
work that either requires
advanced knowledge in a field
of science or learning or that
requires invention, imagination,
originality or talent in a
recognized field of artistic or
creative endeavor.

Standard Duties Test

• T he employee’s “primary
duty” must be managing
the enterprise, or managing
a customarily recognized
department or subdivision of the
enterprise (and managing 2 fulltime employees as well).
• Additional requirements provided
in 29 CFR 541 Subpart B

•  Additional requirements
provided in 29 CFR 541
Subpart C

•  Additional requirements
provided in 29 CFR 541
Subpart D

 United States Department of Labor 5.

of ways, including providing pay raises that increase
workers’ salaries to the new threshold, spreading
employment by reducing or eliminating work hours
of individual employees working over 40 hours per
week for which no overtime is being paid, or paying
overtime. This rule does not require employers to
convert a salaried worker making less than the new

effect on these employees’ pay because they do not work
any overtime even though they will become overtimeprotected. They can continue to be paid a salary as
before.
Example: An office manager performs the duties of
a bona fide administrator and is paid a fixed salary
of $42,000 a year. The manager regularly works

What are some options
for responding to changes to the salary level?

Raise salaries
to maintain
exemption

Pay
current salaries,
with overtime
after 40 hours

salary threshold to hourly status: employers can pay
non-exempt employees on a salary basis and pay
overtime for hours worked beyond 40 in a week. As
long as they are complete and accurate, employers may
use any method they choose for tracking and recording
hours. The method for compliance, which is entirely
within each employer’s discretion, will likely depend
on the circumstances of that organization’s workforce,
including how much employees currently earn and
how often employees work overtime, and may include
a combination of responses, such as paying overtime
and adjusting employees’ hours and schedules. Some
potential responses are discussed below.
A.

Numerous Options for Compliance

i.
After evaluation, no changes to pay or hours
necessary
Many organizations may have white collar employees
who satisfy one of the duties tests for exemption and
earn between the old salary level ($455 per week) and
the new salary level ($913 per week). Employers should
evaluate all such categories of white collar employees
to determine which employees do not work more than
40 hours per workweek. The Final Rule will have no

Reorganize
workloads, adjust
schedules or spread
work hours

Adjust wages

from 9am-5pm, Monday through Friday. Because
of the change in the salary level, the manager is
no longer an exempt employee. Nevertheless, the
Final Rule has no impact on the manager’s pay,
because the manager does not work more than 40
hours in a given week. The office can continue to
pay the manager a fixed salary of $42,000 a year.
ii.

Raise salaries

Employers may choose to raise the salaries of
employees who meet the duties tests, whose salaries are
close to the new salary level, and who regularly work
overtime, to at or above the salary level to maintain
their exempt status.
Example: An operations manager at an
international corporation is paid a salary of
$45,000 a year. Her job duties qualify her for the
administrative exemption. The manager’s job
requires regularly working overtime to direct
business operations in multiple time zones. The
employer may choose to raise the manager’s salary
to at or above $47,476 a year to maintain the
manager’s administrative exemption.

  6. Guidance for Private Employers on Changes to the White Collar Exemptions in the Overtime Final Rule

Most affected employees
do not work overtime (OT)

20%

regularly
work OT

19%

occasionally
work OT

60%

don’t work OT

*Totals don’t sum to 100 due to rounding. For more information,
please see Section VI of the Final Rule.

iii. Pay overtime above a salary
Employers also can continue to pay employees a salary
and pay overtime for hours in excess of 40 per week.
Although the FLSA requires employers to keep records
of how many hours overtime-eligible employees work,
the law does not require that overtime-eligible workers
be paid on an hourly basis. Rather, employers may
continue to pay employees a salary covering a fixed
number of hours, which could include hours above 40.
There are several ways to pay a salary and pay overtime.
An employer might pay employees a salary for the first
40 hours of work per week, and then pay overtime for
any hours over 40. Employers may choose to do this, for
example, for employees who work 40 hours per week
and do not frequently work overtime, or who do not
consistently work the same amount of overtime.
Example: Alexa, a manager at an advertising
agency, earns a fixed salary of $41,600 per
year ($800 per week) for a 40 hour workweek.
Because her salary is for 40 hours per week,
Alexa’s regular rate is $20 per hour. If Alexa
works 45 hours one particular week, the employer
would pay time and one-half (overtime premium)
for five hours at a rate of $30 per hour. Thus, for
that week, Alexa should be paid $950, consisting
of her $800 per week salary and $150 overtime
compensation.

Employers also have the option of paying a straight time
salary for more than 40 hours in a week for employees
who regularly work more than 40 hours, and paying
overtime in addition to the salary. Using this method,
the employer will only be required to pay an additional
half time overtime premium for overtime hours already
included within the salary, and time and a half for hours
beyond those included in the salary.
Example: Jamie, an HR manager at a catering
company, earns a fixed salary of $44,200 per year
($850 per week) for a 50 hour workweek. The
salary does not include the overtime premium.
Because the salary is for 50 hours per week,
Jamie’s regular rate is $17 ($850/50). In a normal
50 hour week, the employer would pay Jamie the
additional half time overtime premium for the 10
hours of overtime ($8.50/hour). If Jamie worked
more than 50 hours in a week, the employer
would also owe overtime compensation at time

Employers can also
pay non-exempt employees
on a salary basis and
pay overtime for hours
worked beyond 40 in a week.
As long as they are complete
and accurate, employers
may use any method they
choose for tracking and
recording hours.

 United States Department of Labor 7.

Many organizations
may already have systems in
place for tracking
non-exempt employees’
hours. These existing
systems can be used for
newly overtime-protected
employees impacted by the
Overtime Rule.
and a half the regular rate ($17 x 1.5) for hours
beyond 50 (because the salary does not cover any
payment for those hours).
It is also possible for an employer and employee to
agree to a fixed salary for a workweek of more than
40 hours, in which the salary includes overtime
compensation under certain conditions. If, however,
the employee’s schedule changes in any way during
any week (either by working more or fewer hours),
the employer must adjust the salary for that week.
Employees must be paid based on the hours actually
worked during the workweek. This method of paying
for overtime, therefore, might be most helpful for
employees who consistently work the same amount of
overtime every week.
Example: Andre, a manager on a construction
project, has an agreement with his company where
he is paid a fixed salary of $39,520 per year ($760
per week) for a 45 hour workweek. The fixed
salary includes both straight time for the first 40
hours ($16 regular rate x 40 hours) and overtime
compensation for hours 41-45 ($24 overtime rate
x 5 hours). If Andre’s schedule changes in any way
for any week, his salary needs to be adjusted to
reflect the hours actually worked for that week.

Finally, where employees have hours of work which
fluctuate from week to week, employers can pay a
fixed salary that covers a fluctuating number of hours
at straight time if certain conditions are met, including
a clear mutual understanding between the employer
and employee. See 29 CFR 778.114 for additional
information and criteria for this payment method.
Any overtime-eligible employee may continue to be paid
a salary, provided that overtime compensation is also
paid and appropriately documented in the employer’s
record. Many organizations may already have systems
in place for tracking non-exempt employees’ hours.
These existing systems can be used for newly overtimeprotected employees impacted by the Overtime Rule.
As long as they are complete and accurate, employers
may use any method they choose for recording hours.
Employers may use their own system to keep track of
employees’ work hours or require employees to enter
their own time into payroll programs. See WHD Fact
Sheet #21: Recordkeeping Requirements under
the Fair Labor Standards Act (FLSA).
There is no requirement that employees “punch
in” and “punch out.” An employer does not need to
require an employee to sign in each time she starts
and stops work. The employer must, however, keep an
accurate record of the number of daily hours worked
by the employee. To do so, an employer could allow
an employee to just provide the total number of hours
worked each day, including the number of overtime
hours, by the end of each pay period. For employees
who work a fixed schedule, an employer need not
track the employee’s exact hours worked each day;
rather, the employer and employee can agree to a
default schedule that reflects daily and weekly hours,
and indicate that the employee followed the agreedupon schedule, if that is true. Only when the employee
deviates from the schedule is the employer required
to record the number of hours worked each day. Many
employees, both exempt and non-exempt, track their
daily and weekly hours by simply recording their hours
worked for the employer.
iv. Reorganize Workloads, Adjust Schedules or
Spread Work Hours
Employers may wish to reorganize workload
distributions or adjust employee schedules in order
to comply with the Final Rule. For example, work
assignments that are predictable could be assigned
at the beginning of the workweek (rather than, for
instance, late in the day on Friday for an employee who
typically works Monday—Friday) in order to manage
overtime hours. Or, when employees regularly perform
duties outside of a 9 to 5 workday, organizations may

  

consider adjusting those employees’ schedules to
encompass when most of the work takes place, so that
they will not work more than 40 hours each workweek.
(The FLSA does not specify days or schedules, such as
a Monday—Friday workweek or a 9 to 5 workday; this
is provided only as an example of a schedule that many
workers follow.)
Example: John, a manager for a local hardware
store who satisfies the duties test for the executive
exemption, currently begins work at 9am Monday—
Friday. Under the Final Rule’s new salary level, he
would be newly entitled to overtime compensation.
Among other duties, John works until the store
closes at 7pm. The store may wish to adjust John’s
schedule such that he doesn’t need to begin work
until 10am, thus limiting the number of overtime
hours he works.
To reduce or eliminate overtime hours, employers may
decide to hire new employees or redistribute work
hours in excess of 40 across current staff, such as by
increasing the work hours of staff who work less than
40 hours per week.
v.

Adjust Wages

Employers can adjust the amount of an employee’s
earnings to reallocate it between regular wages and
overtime so that the total amount paid to the employee
remains largely the same. Employers may not, however,
reduce an employee’s hourly wage below the highest
applicable minimum wage (federal, state, or local), or
continually adjust wages each workweek in order to
manipulate the regular rate. The employees’ hours
worked must still be recorded, and overtime must be
paid according to the actual number of hours worked
each week.

Example: Assume a supervisor at a private gym who
satisfies the duties test for the executive exemption
earns $37,000 per year ($711.54 per week). The
supervisor regularly works 45 hours per week. The
employer may choose to instead pay the employee an
hourly rate of $15 and pay time and one-half for the 5
overtime hours worked each week.
$600.00 (40 hours x $15 / hour)
+ $112.50 (5 OT hours x $15 x 1.5)
$712.50 per week

Alternatively, the employer may choose to pay
that employee a salary for 40 hours of $600 per
week and pay the overtime for hours in excess of
40 per week.
$600.00 (salary for 40 hours/week, equivalent to $15/hour)
+ $112.50 (5 OT hours x $15 x 1.5)
$712.50 per week

Conclusion
The overtime rule updated the regulations to ensure
that the FLSA’s intended overtime protections are
fully implemented, and to simplify the identification of
overtime-eligible workers, making the exemption easier
for employers and workers to understand and apply.
This guidance is provided to help employers understand
their responsibilities and options for complying with the
FLSA’s overtime provisions following publication of the
Final Rule.
For additional information, please visit www.dol.gov/whd.