Recent lawsuits have demonstrated that some employers aren’t clear on whether or not an employee can be classified as “exempt” according to the Fair Labor Standards Act. But misclassifying an employee can have disastrous financial repercussions in the form of owed back wages, so it is important to understand the difference.

The three requirements for an exempt employee are as follows:

Salary Level Test

Employees who are paid more than $23,600 per year ($455 per week) pass this test.

Salary Basis Test

An employee is paid on a salary basis if s/he has a guaranteed minimum* amount of money s/he can count on receiving for any and every work week (throughout the entire year) in which s/he performs “any” work.

The Duties Test

These FLSA exemptions are limited to employees who perform relatively high-level work. Whether the duties of a particular job qualify as exempt depends on what those duties are regardless of what the job description says or what the job title is.  It is the actual job tasks that must be evaluated, along with how the particular job tasks “fit” into the employer’s overall operations.

There are three typical categories of exempt job duties, called “executive,” “professional,” and “administrative.”

Exempt executive job duties:

Job duties are exempt executive job duties if the employee:

  1. regularly supervises two or more other employees, and also
  2. has management as the primary duty of the position, and also,
  3. has some genuine input into the job status of other employees (such as hiring, firing, promotions, or assignments).

Exempt professional job duties:

Professionally exempt work means work which is predominantly intellectual, requires specialized education, and involves the exercise of discretion and judgment. Advanced degrees are the most common measure of this, but are not absolutely necessary if an employee has attained a similar level of advanced education through other means (and perform essentially the same kind of work as similar employees who do have advanced degrees). Some employees may also perform “creative professional” job duties which are exempt. It is meant to cover employees in these kinds of jobs whose work requires invention, imagination, originality or talent; who contribute a unique interpretation or analysis.

Exempt administrative job duties:

The most elusive and imprecise of the definitions of exempt job duties is for exempt “administrative” job duties.  The regulatory definition provides that exempt administrative job duties are

  1. office or nonmanual work, which is
  2. directly related to management or general business operations of the employer or the employer’s customers, and
  3. a primary component of which involves the exercise of independent judgment and discretion about
  4. matters of significance.