Correctly classifying and paying employees is vital to meet both federal and state requirements for compensation. Read on to learn about how to define exempt and non-exempt employees and which employees must be paid overtime.
What Is an Exempt Employee?
An exempt employee is someone who is not eligible for overtime pay. Under the Fair Labor Standards Act (FLSA), an exempt employee is someone who:
- Is paid an annual salary
- Is considered an executive, administrative, or professional employee
- Is considered a skilled employee in the computer field
- Is considered an outside sales employee, e.g., works primarily outside the place of employment
- Earns a minimum salary of $684 per week*
- Earns an annual salary of $107,432*
An exempt employee may be paid overtime, but it is not required under the FLSA.
*These numbers reflect the final rule issued in 2019. An updated rule was issued by the Department of Labor in 2024, but it was vacated by the U.S. District Court and has several pending lawsuits.
What Is a Non-Exempt Employee?
A non-exempt employee under the FLSA is someone who:
- Is age 16 or older
- Is paid hourly
- Is not part of a class of worker exempted by federal or state law
Non-exempt employees must be paid overtime, calculated as 1.5 times their hourly wage for every hour worked over 40 in a workweek. A week is classified as seven 24-hour periods in a row, but it does not need to start on Sunday. Weekends or holidays do not automatically require overtime pay unless the hours worked on those days bring the total to more than 40 for the week.
FAQ
Is an employee’s title grounds for exemption?
No, an employee’s specific job duties and salary must meet minimum qualifications for exemption.
What qualifies someone for an executive exemption?
The employee must receive the federal weekly minimum salary, manage a business or a department, have at least two employees report to them, and possess the authority to hire, fire, or give promotions. Management often refers to duties such as planning the work for others, hearing and resolving employee grievances, disciplining, determining materials needed for the work, planning or controlling the company budget, or implementing compliance measures.
What qualifies someone for an administrative exemption?
The employee must receive the federal weekly minimum salary. Their primary duties must be non-manual, office tasks that support their employer’s business operations. They must also have some ability to exercise independent judgment in significant matters.
What qualifies someone for a professional exemption?
An employee is considered a professional when their weekly salary meets the federal minimum and they are considered a “learned professional.” This classification describes employees in the field of science or learning, with knowledge achieved through prolonged advanced study at a specialized institution. Applicable fields include law, medicine, theology, teaching, engineering, or pharmacy. The employees’ daily work tasks require advanced knowledge and intellectual exercise and the ability to make influential decisions.
A “creative professional” receives the minimum weekly salary and performs work tasks that require imagination, invention, originality, or talent in a creative or artistic field. These exemptions are often met by professionals such as actors, musicians, novelists, and some journalists.
What qualifies someone for a computer employee exemption?
A computer employee is exempt when they receive the federal minimum weekly salary, and do the work of a computer systems analyst, programmer, software engineer, or other similar roles. Duties include designing, developing, creating, testing, or analyzing computer software or operating systems. They may also develop applications and specifications of the software for end users and hardware manufacturers.
Employees who manufacture or repair computer equipment or employees who rely on computer equipment for their job do not meet the computer employee exemption.
What qualifies someone for the outside sales exemption?
An outside salesperson works primarily outside the employer’s primary location making sales, establishing contracts, or taking orders for products or services. This may include advertising, such as radio or television time or in a magazine or newspaper. An employee who works mainly from home does not qualify for this exemption. “Outside” may be thought of as traditional “door-to-door” sales, e.g., at the client’s or customer’s place of business or a neutral location of their choosing.
Correctly identifying your employees’ job responsibilities ensures that your company is in compliance with all federal and state overtime regulations.
