Overtime Law: Professional Exemption Clarified

Like with many other employment laws in general and wage laws specifically, there is no bright line rule that defines which employees are exempt from overtime, and which workers are entitled to overtime compensation. Below, I will try to make the job of both employers and employee who try to apply professional exemption to their situation easier and more certain.

For the purposes of determining professional exemption, the term “professional” means any employee who: (1) is compensated on a salary or fee basis at a rate of no less than $455 per week (periodically adjusted); (2) whose primary duty is the performance of work (a) requiring knowledge of an advanced type in a field of science or learning customarily acquired by a prolonged course of specialized intellectual instruction; or (b) requiring invention, imagination, originality or talent in a recognized field of artistic or creative endeavor. 29 C.F.R. 541.300(a).

The phrase “work requiring advanced knowledge” is the key part which is the most commonly litigated and disputed element of the rule. According to regulations, this includes work requiring consistent (although not necessarily constant) exercise of discretion and judgment, as distinguished from routine mental, manual, mechanical or physical work. An employee who performs work requiring the advanced knowledge generally uses the advanced knowledge to analyze, interpret or make deductions from a set of facts. The advanced knowledge required to be exempt as a professional cannot be attained at a high school level.

The above principle is applied to different professions in a way that draws a distinction between workers who must have an advanced degree to qualify for the position held and necessarily use their advanced education in the scope of their work, and those who don’t. Thus, CPA’s and financial analyst with a degree in finance generally qualify as exempt professionals, while accounting clerks, bookkeepers and other employees who perform routine billing work are not exempt. Dental Hygienist and Physician Assistants are generally exempt as those position require an advanced four-year degree. Chefs, such as executive and sous chefs, who have a degree in culinary arts are generally exempt, while cooks are not. Paralegal and legal assistants are generally not exempt, as a degree in paralegal studies is generally not a prerequisite to holding a paralegal position.

Thus, as the above examples show, one of the key questions that needs to be asked in determining whether a professional exemption applies to a particular employee is whether his job/position requires and advanced degree, and he actually uses the knowledge acquired in the course of obtaining that degree in his day-to-day duties.

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