Chapter 2 introduced the highly compensated employee threshold as one of the dollar figures the exemption depends on; this section lays out how that shortcut actually works. An employee is deemed exempt under section 13(a)(1) of the Act if total annual compensation reaches at least $107,432 and the employee customarily and regularly performs any one or more of the exempt duties or responsibilities of an executive, administrative, or professional employee — not the full duties test Chapter 3 walked through for each of those categories, just one or more of the duties that test looks for. A high level of pay substitutes for a detailed duties analysis, on the theory that an employee paid that well is unlikely to be doing work the overtime premium was meant to protect.

Total annual compensation is not simply base pay measured against a calendar year. It must include at least $684 per week paid on a salary or fee basis — the same weekly floor Chapter 2 covered for the standard exemption — but with one exception that matters here: the standard exemption lets up to ten percent of that weekly salary be satisfied through nondiscretionary bonuses, incentives, or commissions, and that ten-percent allowance does not apply to highly compensated employees. For a highly compensated employee, the $684 weekly floor must be met on a pure salary or fee basis; commissions and nondiscretionary bonuses do not count toward it. Those forms of pay still matter to this test, but only toward the separate $107,432 total annual compensation figure. That figure is measured over a 52-week period the employer sets (a calendar year, fiscal year, or anniversary-of-hire year; the calendar year applies if the employer does not choose another), and may also include commissions, nondiscretionary bonuses (defined in § 7.6), and other nondiscretionary compensation. Total annual compensation does not include board, lodging, or other facilities, nor payments for medical or life insurance, retirement plan contributions, or the cost of other fringe benefits. If an employee’s earnings fall short of $107,432 by the last pay period of the 52-week period, the employer may make one final payment — during the last pay period or within one month after the period ends — sufficient to close the gap. That catch-up payment counts only toward the 52-week period it closes out, not toward the period in which the payment is made. If the employer does not make it, the employee simply does not qualify as a highly compensated employee for that year — though the employee may still qualify as exempt under the standard executive, administrative, or professional tests.

The relaxed duties requirement has a hard boundary of its own: it applies only to employees whose primary duty is office or non-manual work. Non-management production-line workers and non-management employees in maintenance, construction, and similar trades — carpenters, electricians, mechanics, plumbers, iron workers, longshoremen, and other workers whose jobs involve repetitive operations, physical skill, and energy — are not exempt under this section no matter how highly they are paid. Chapter 2 covered why blue-collar work and impressive titles rarely qualify, and that limit carries through here without exception. Within that boundary, though, the requirement really is lighter: an employee who customarily and regularly directs the work of two or more other employees can qualify as a highly compensated executive even without meeting every other element of the executive exemption Chapter 3 described.