Under The Fair Labor Standards Act (FLSA), an exempt employee is one who receives a fixed salary, meets one of the FLSA exemption tests, and is not entitled to overtime pay. However, all employees are considered non-exempt (and entitled to overtime) unless the employee’s job duties meet certain exemption criteria, or unless FLSA regulations specifically allow an exemption and the employer has opted to use this exemption.
Employers commonly make the mistake of classifying any employee who receives a fixed salary as an exempt employee who is not eligible for overtime pay, without first qualifying the employee for an FLSA exemption. But, in order to be considered exempt from overtime, a salaried employee has to qualify for one of the following FLSA exemptions:
- Executive – Primary duties must regularly involve managing the company and directing the work of two or more employees. Includes executive officers, controllers, vice presidents, directors, etc.
- Administrative – Primarily performs office or non-manual work directly related to managing or operating the business. Includes managers, supervisors, administrators, etc.
- Professional – Primary duties consist of work that requires advance knowledge (university level at least) in a field of science or learning, or specific artistic or creative skill (as opposed to routine mental or manual labor). Includes accountants, nurses, engineers, and composers, graphic designers, singers, etc.
- Computer-Related – Duties involve designing, developing, documenting, testing, or modifying computer systems or programs. Includes network analysts, developers, software engineers, etc.
- Outside Sales – Regularly engaged in work outside of the employer’s place of business. Primary duties involve procuring sales or contracts for services. Includes traveling salesperson, contract negotiators, etc.
- Highly Compensated Employees – Primarily performs office or non-manual work and at least one of the duties or responsibilities exempt under the executive, professional, or administrative exemptions. Includes real estate brokers, stock brokers, etc.
With the exception of outside sales employees, to be considered exempt from overtime under either of the exemptions above, the employee must also receive a salary of at least $913/week or $47,476/year which cannot be reduced because of the quality or quantity of the work he or she performs. If a salaried employee is not paid at least $913/week or $47,476/ year, he or she must be paid an hourly wage and become eligible for overtime.
State and local wage and hour laws will also determine if an employee is exempt from overtime pay and on what basis. For more information, contact an experienced employment law attorney in the area where you work.