What Exempt Employee Status Means

Exempt employees are employees who, because of their positional duties and responsibilities and level of decision-making authority, are exempt from the overtime provisions of the Fair Labor Standards Act (FLSA). Whether an employee is exempt or nonexempt depends on how much money the employee is paid, how the employee is paid, and the nature and responsibilities of the work they do.

Exempt employees are expected, by most organizations, to work whatever hours are necessary to accomplish the goals and deliverables of their exempt position. Thus, exempt employees should have more flexibility in their schedules to come and go as necessary to accomplish work than nonexempt or hourly employees. 

Exempt employees also expect to have more opportunities to telecommute or work from home since the requirement to accomplish a whole job is not always dependent on the employee's working location. They expect less supervision than a nonexempt employee can expect, too.

Exclusions from the FLSA Coverage

According to the FLSA, "Particular jobs may be completely excluded from coverage under the FLSA overtime rules. There are two general types of complete exclusion. Some jobs are specifically excluded in the statute itself. For example, employees of movie theaters and many agricultural workers are not governed by the FLSA overtime rules. Another type of exclusion is for jobs which are governed by some other specific federal labor law."

There are strict criteria for meeting the exempt qualification. A manager can't just decide to make an employee exempt for ease in calculating salary, even if the employee agrees to it. To meet the conditions for exemption requires that a job meets specific criteria.

Here are some of the jobs for people who do meet the strict criteria for classification as exempt employees. The Department of Labor excludes these jobs.

"Executive, administrative, and professional employees (including teachers and academic administrative personnel in elementary and secondary schools), outside sales employees, and employees in certain computer-related occupations (as defined in DOL regulations);

"Employees of certain seasonal amusement or recreational establishments, employees of certain small newspapers, seamen employed on foreign vessels, employees engaged in fishing operations, and employees engaged in newspaper delivery;

"Farmworkers employed by anyone who used no more than 500 “man-days” of farm labor in any calendar quarter of the preceding calendar year;

"Casual babysitters and persons employed as companions to the elderly or infirm."

Examples of Exempt and Nonexempt Jobs

Here are some examples that demonstrate what makes a particular employee's job meet the strict criteria for classification as exempt employees.

• Outside sales:  If you go out and meet with customers, you qualify for the exemption. This does not apply to inside salespeople, such as call center employees. Even though these people may earn a commission, they are still eligible for overtime pay. Only salespeople who actually leave the building qualify.
• Managerial Employees: These are people who manage two or more employees and have hire/fire/evaluation authority over them. The manager must also perform managerial tasks. In other words, a fast-food restaurant manager who spends 90% of their day running a cash register and making hamburgers does not qualify as an exempt employee.

A fast-food manager who spends 60% of their day handling employee issues, scheduling, hiring and firing, and doing other managerial tasks and 40% of her time running a cash register and making hamburgers does qualify as exempt, as long as she also meets the salary basis test.

An employee is paid on a salary basis if the employee has a guaranteed minimum amount of money that he can count on receiving for any workweek in which the employee performs any work. This amount doesn't have to be the entire compensation the employee receives, but some amount of pay the employee can count on receiving must be received for any workweek in which he performs work. 

• Learned professionals: If you work rather independently (not completely, of course), and are a knowledge-based worker, you can qualify as exempt. Accountants (but not accounts payable/receivable clerks), doctors, lawyers, registered nurses (but not licensed practical nurses (LPNs), teachers, consultants, and similar jobs with independent responsibilities are considered exempt employment status.
• Administrative professionals: This sounds like administrative assistants, but people in those jobs are almost always non-exempt because of the nature of their job duties. These exempt jobs refer to the people who keep the business running and are generally members of the white collar workforce. Marketing, IT, Human Resources, Finance, and other administrative personnel who require a high degree of knowledge and work independently qualify as exempt.
• Minimum salary: In order to be exempt from overtime, your company must pay you a minimum salary level. Currently, that is $455 a week or $23,600 per year. However, the Department of Labor is considering raising that salary threshold from $455 a week (set in 2004) to $679 per week. That’s a new qualifying salary level of $35,308 per year, around $15,000 less than had previously been recommended during the Pres. Obama administration. So, stay tuned to how this legal situation plays out.

If you are a manager doing managerial tasks and earning only $35,000 a year, you will become eligible for overtime if this law goes through. It does not, however, make positions such as teachers eligible for overtime, although some of them, especially starting out, earn less than $35,308 per year.

As an employer, note that any position that pays the employee more than $100,000 a year is very likely classified as an exempt position.

More About Exempt Employees

To summarize a few specifications about the classification of an exempt employee, consider the following. Exempt employees must receive the same amount of pay every pay period, regardless of how many hours they work. (Bonuses are allowed, but salary deductions are not except in special circumstances.)

This means if an exempt employee leaves an hour early on Tuesday, you can't dock her pay except in six specific situations. You can deduct it from her PTO bank and you can fire her, but you must pay her the full salary regardless. If an exempt employee is consistently working less than the usually expected forty hours per week, you can consider these actions.

Managers can require strict schedules from exempt employees, but it's generally better to allow exempt employees flexibility in completing their jobs. Remember, with an exempt employee it's all about the accomplishment of the job and not about the hours worked.

The rules for exemption are quite complicated and often companies make mistakes. If you feel like you should be eligible for overtime pay, ask your Human Resources department to re-evaluate your job. They should be able to justify your exempt status.

If they can't, then you're eligible for overtime pay, going backward and forwards. As a last resort, you can file a complaint with your local Department of Labor.

Exempt Employees Are Often Full-Time Employees

The FLSA does not define what is a full-time employee or a part-time employee. What is counted as a full-time employee is generally defined by the employer policy. The definition of a full-time employee is often published in the employee handbook.

A full-time employee has traditionally worked a 40 hour work week with the expectation that exempt employees will work the hours necessary to accomplish their jobs. A nonexempt employee must be paid overtime for time worked in excess of 40 hours.

Today, some employers count employees as full time if they work 30, 32, or 36 hours a week. In fact, fewer required work hours is considered a non-standard benefit in some organizations.

In many organizations, one differentiation between full time and part time employees is eligibility for benefits such as health insurance, paid time off (PTO), paid vacation days, and sick leave. Some organizations enable part-time employees to collect a pro-rated set of benefits based on their hours worked.

Hopefully, you are clear about the classification of employees in requiring exempt employment status as a result of this information.

Disclaimer: Please note that the information provided, while authoritative, is not guaranteed for accuracy and legality. The site is read by a world-wide audience and ​employment laws and regulations vary from state to state and country to country. Please seek legal assistance, or assistance from State, Federal, or International governmental resources, to make certain your legal interpretation and decisions are correct for your location. This information is for guidance, ideas, and assistance.