The University of Tennessee, Knoxville

Tennessee County Municipal Advisory Service

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Highly Compensated Executive Employees

Reference Number: MTAS-1522
Tennessee Code Annotated
Reviewed Date: July 25, 2017
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(NOTE: The U.S. District Court for the Eastern District of Texas issued a preliminary injunction preventing the implementation of the revised FLSA overtime regulations. The case was brought by 21 states. The Obama Administration appealed the decision to the U.S. Court of Appeals for the Fifth Circuit. The 5th Circuit Court of Appeals granted a motion of the Trump Administration for an additional 60 days to determine its position on the appeal of the ruling by the District Court enjoining the FLSA overtime regulation. The Administration's decision was initially due by May 1st, 2017. The 5th Circuit granted another extension until June 30th.  The Labor Department filed a brief with the Fifth Circuit Court of Appeals indicating that it will not defend the $913 salary rate and asked the Court to clarify its ability to set a salary level.  The department has also issued a request for public comments.  Until we hear more, continue to comply with the old salary level testing regulations.)

A managerial employee who is “highly compensated” may qualify as an exempt executive employee under what DOL calls a “short-cut test.” 69 Fed. Reg. 22,174. Accordingly, 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. DOL regulations (29 C.F.R. § 541.601(b)(4) define a highly compensated employee as one having a “total annual compensation of at least $100,000.” Effective December 1, 2016, a highly compensated employee must receive total compensation of at least $134.000 annually.

The total may include several forms of compensation including commissions, nondiscretionay bonues and other nondiscretionary compensationearned durng a 52 week period, provided that at least $455 per week is paid on a salary or fee basis ($913 per week after December 1, 2016). (Note: Discretionary bonuses are not included in the definition of total annual compensation. 69 Fed. Reg. 22,175.

The DOL exemption for the highly-compensated employee is applicable only to employees whose primary duties include performing office or non-manual work. Therefore, “production line workers and non-management employees in maintenance, construction and similar occupations such as carpenters, electricians, mechanics, plumbers, iron workers, craftsmen, operating engineers, construction workers, laborers and other employees who perform work involving repetitive operations with their hands, physical skills and energy” cannot be exempt as “highly-compensated employees” no matter how highly paid they are. 29 C.F.R. § 541.601(d).

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