Under the federal FLSA, employees must be paid minimum wage, employees are eligible for overtime pay, and other labor regulations apply. However, there is an exemption from overtime laws for workers that are employed in executive, administrative, and professional positions. When determining whether an employee is exempt, evaluate the duties the employees performs, instead of basing the decision on a job title. It is important to be sure an employee is properly classified as exempt or non-exempt as the exemptions are narrowly applied, the burden of proving an exemption is proper rest with the employer, and there can be high penalties for an improper classification.

Executive Exemption

An employee is properly classified under the executive exemption if all of the following tests are met:

  • The employee must be compensated on a salary basis at a rate not less than $455 per week;
  • The employee’s primary duty must be managing the enterprise, or managing a customarily recognized department or subdivision of the enterprise;
  • The employee must customarily and regularly direct the work of at least 2 or more other full-time employees or their equivalent; and
  • The employee must have the authority to hire or fire other employees, or the employee’s suggestions and recommendations as to the hiring, firing, advancement, promotion or any other change of status of other employees must be given particular weight.

Administrative Exemption

This exemption is the most commonly misapplied exemption. Many times it is wrongly applied to all workers who perform administrative or clerical duties. Review the factors below, keeping in mind that work that involves following an established procedure or checklist, is generally not work that exercises discretion and independent judgment. Instead, the administrative employee has authority to make an independent choice, free from immediate direction or supervision, subject only to review at a higher level. An employee is properly classified under the administrative exemption if all of the following tests are met:

  • The employee must be compensated on a salary or fee basis at a rate not less than $455 per week;
  • The employee’s primary duty must be the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers; and
  • The employee’s primary duty includes the exercise of discretion and independent judgment with respect to matters of significance.

Professional Exemption

There are 2 subsets of professional employees, learned professionals and creative professionals. As an example, the learned professional worker is one who attained an academic degree for a field of science or learning such as a lawyer, doctor or architect. Generally, the creative professional performs work in a recognized field of artistic or creative value, which includes such fields as music, writing, acting and the graphic arts. An employee is properly classified under the learned professional employee exemption if all of the following tests are met:

  • The employee must be compensated on a salary or fee basis at a rate not less than $455 per week;
  • The employee’s primary duty must be the performance of work requiring advanced knowledge, defined as work which is predominantly intellectual in character and which includes work requiring the consistent exercise of discretion and judgment;
  • The advanced knowledge must be in a field of science or learning; and
  • The advanced knowledge must be customarily acquired by a prolonged course of specialized intellectual instruction.

An employee is properly classified under the creative professional employee exemption if all of the following tests are met:

  • The employee must be compensated on a salary or fee basis at a rate not less than $455 per week;
  • The employee’s primary duty must be the performance of work requiring invention, imagination, originality or talent in a recognized field of artistic or creative endeavor.

Each state may have its own regulation regarding exemptions. Where a state law differs from the FLSA, an employer must comply with the standard that is most protective to employees.