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 28, 2016
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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).