[Code of Federal Regulations]
[Title 29, Volume 3]
[Revised as of July 1, 2005]
From the U.S. Government Printing Office via GPO Access
[CITE: 29CFR541.601]

[Page 194-195]
 
                             TITLE 29--LABOR
 
         CHAPTER V--WAGE AND HOUR DIVISION, DEPARTMENT OF LABOR
 
PART 541_DEFINING AND DELIMITING THE EXEMPTIONS FOR EXECUTIVE, 
 
                      Subpart G_Salary Requirements
 
Sec. 541.601  Highly compensated employees.

    (a) 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.
    (b)(1) ``Total annual compensation'' must include at least $455 per 
week paid on a salary or fee basis. Total annual compensation may also 
include commissions, nondiscretionary bonuses and other nondiscretionary 
compensation earned during a 52-week period. Total annual compensation 
does not include board, lodging and other facilities as defined in Sec. 
541.606, and does not include payments for medical insurance, payments 
for life insurance, contributions to retirement plans and the cost of 
other fringe benefits.
    (2) If an employee's total annual compensation does not total at 
least the minimum amount established in paragraph (a) of this section by 
the last pay period of the 52-week period, the employer may, during the 
last pay period or within one month after the end of the 52-week period, 
make one final payment sufficient to achieve the required level. For 
example, an employee may earn $80,000 in base salary, and the employer 
may anticipate based upon past sales that the employee also will earn 
$20,000 in commissions. However, due to poor sales in the final quarter 
of the year, the employee actually only earns $10,000 in commissions. In 
this situation, the employer may within one month after the end of the 
year make a payment of at least $10,000 to the employee. Any such final 
payment made after the end of the 52-week period may count only toward 
the prior year's total annual compensation and not toward the total 
annual compensation in the year it was paid. If the employer fails to 
make such a payment, the employee does not qualify as a highly 
compensated employee, but may still qualify as exempt under subparts B, 
C or D of this part.
    (3) An employee who does not work a full year for the employer, 
either because the employee is newly hired after the beginning of the 
year or ends the employment before the end of the year, may qualify for 
exemption under this section if the employee receives a pro rata portion 
of the minimum amount established in paragraph (a) of this section, 
based upon the number of weeks that the employee will be or has been 
employed. An employer may make one final payment as under paragraph 
(b)(2) of this section within one month after the end of employment.
    (4) The employer may utilize any 52-week period as the year, such as 
a calendar year, a fiscal year, or an anniversary of hire year. If the 
employer does not identify some other year period in advance, the 
calendar year will apply.
    (c) 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. Thus, a highly compensated 
employee will qualify for exemption 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. An employee may 
qualify as a highly compensated executive employee, for example, if the 
employee customarily and regularly directs the work of two or more other 
employees, even though the employee does not meet all of the other 
requirements for the executive exemption under Sec. 541.100.

[[Page 195]]

    (d) This section applies only to employees whose primary duty 
includes performing office or non-manual work. Thus, for example, non-
management production-line workers and non-management employees in 
maintenance, construction and similar occupations such as carpenters, 
electricians, mechanics, plumbers, iron workers, craftsmen, operating 
engineers, longshoremen, construction workers, laborers and other 
employees who perform work involving repetitive operations with their 
hands, physical skill and energy are not exempt under this section no 
matter how highly paid they might be.