Overtime Pay for Highly Compensated Employees?

Q. How can an employee who makes over $100,000 per year be entitled to overtime pay?

A. According to the United States Constitution, Congress is the branch of government that makes laws. The executive branch of government enforces laws. When Congress passed the Fair Labor Standards Act it exempted employees with certain job duties from the requirement to receive overtime.

Congress delegated to the secretary of labor—a part of the executive branch—the authority to define and delimit the what job duties make an employee a bona fide “executive”, “administrative”, “professional”, and “outside salesman”. Congress did not delegate to the secretary of labor the authority to create additional exemptions.

In 2004, the Bush Administration Department of Labor—in a gift to corporations—revised many of its regulations which define and delimit the definitions of the exemptions. One of the regulations that the secretary of labor added is referred to as “the highly compensated employee exemption.” 29 CFR 541.601. In the wording of the regulation, the secretary says, “[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.” (Emphasis added). Only the Congress can change the FLSA to create new exemptions to the law based on an employee’s level of compensation. I take the position that the “highly compensated employee exemption” is void because the Department of Labor did not have the authority to enact it in the first place.

As far as I know, the validity of the regulation has not yet been decided by the courts.

In addition, employers are required to pay overtime to some “highly compensated” employees because the terms of the regulation do not exempt the employees. The regulation says, “An employee with total annual compensation of at least $100,000 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 identified in subparts B, C or D of this part.” If the employee does not perform any of the duties of an executive, administrative or professional employee, the regulation does not apply.

Many employees who make over $100,000 make that salary for exercising high degrees of skill and talent—not for administering or managing a business. Examples of highly paid employees who may not be exempt are pharmaceutical reps, mortgage bankers and other bank employees, radio DJ’s, television reporters and producers, graphic designers, product managers and other highly skilled valuable employees whose job duties do not include executive administrative or professional tasks—as those terms are defined and delimited by the secretary of labor.