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Executive Exemption

Executive Exemption – A Quick Guide for New York Employers

Most New York employers are subject to both federal and state minimum wage and overtime requirements. In most cases, this means the employer must pay its employees at least the minimum wage for all hours worked and time-and-a-half for hours over 40 in a week. There are, however, many exceptions to these requirements. This post addresses the executive exemption under both the FLSA and New York law.

(Click here for A Quick Guide of the New York State and federal Professional exemptions.)

(Click here for A Quick Guide of the New York State and federal Administrative exemptions.)

FLSA Executive Exemption

Despite the name, the “executive” exemption does not necessarily apply to all executives in a company. In fact, it often applies to employees who are not company executives.

Under the FLSA (the federal minimum wage/overtime law), employees may be exempt under the executive exemption if:

  1. They are compensated on a salary or fee basis of at least $455* per week;
  2. Their primary duty is management of the enterprise or of a customarily recognized department or subdivision of it;
  3. They customarily and regularly direct the work of two or more other employees; and
  4. They have the authority to hire or fire other employees or their suggestions and recommendations as to the hiring, firing, advancement, promotion or any other change of status of other employees are given particular weight.

*2016 regulations increased the salary threshold to $913 per week beginning December 1, 2017. However, a federal judge temporarily enjoined the new regulations from taking effect. More recently, the Trump Department of Labor has indicated that it will not seek to maintain the higher thresholds set by the Obama Administration.

New York Executive Exemption

Under New York State law, employees can be exempt from minimum wage and overtime requirements if:

  1. Their primary duties consist of management of the enterprise or a subdivision of it;
  2. They customarily and regularly direct the work of two or more other employees;
  3. They have the authority to hire, promote, advance, or fire other employees, or to effectively recommend such actions;
  4. They customarily and regularly exercise discretionary powers; and
  5. They receive a sufficient weekly salary*.

*The weekly salary threshold now depends on geographic location within New York State. Until December 31, 2017, the threshold is $825 per week for employees of large employers (11+ employees) in New York City, $787.50 per week for employees of smaller employers in New York City, $750 per week for employees in Nassau, Suffolk, and Westchester counties, and $727.50 per week for employees in the rest of the state. The thresholds are scheduled to increase on December 31, 2017 and December 31, 2018 across the state, and on December 31st of subsequent years in some parts of the state.

Summary

The executive exemptions only apply to certain employees whose actual job situations meet the requirements. Job titles do not automatically determine exemption, nor does the fact that the employee receives a salary.

Employers should periodically review employees’ job duties to determine whether they qualify for exemption. For example, employees who previously supervised multiple employees, but now only supervise one, will no longer qualify for the executive exemption.

In addition, employers must consider whether an employee’s salary remains high enough to qualify for the exemption. Under New York law, the threshold is increasing annually, and at higher rates in some parts of the state. Remember that it is not enough to satisfy the federal salary threshold. When the New York threshold is higher, the employee would need to receive the higher salary level to be fully exempt (unless a different New York state exemption applies).

Read about the New York State and FLSA Professional Exemptions here.

Read about the New York State and FLSA Administrative Exemptions here.

 

Check out my Employment Law Dictionary here!