Exempt Employees

Term Definition
Exempt employees are also referred to as salaried employees. Employees classified as “exempt” are exempt from certain wage and hour laws, such as overtime pay. Exempt employees receive an annual salary, which is paid equal payments in some specified time interval regardless of hours worked. Thus an exempt employee who works 50 hours per week as opposed to 40 hours per week does not receive additional pay for additional time worked.

The Department of Labor details the characteristics of exemption provided by Section 13(a)(1) of the Fair Labor Standards Act (FLSA) as defined by Regulations, 29 CFR Part 541. Section 13(a)(l) of the FLSA exempts executive, administrative, professional, and outside sales employees from the minimum wage and overtime requirements of the FLSA, provided they meet certain tests regarding job duties and responsibilities and are compensated "on a salary basis" at not less than stated amounts. Subject to certain exceptions set forth in the regulations, in order to be considered "salaried", employees must receive their full salary for any workweek in which they perform any work without regard to the number of days or hours worked. This rule applies to each exemption that has a salary requirement (outside sales employees, and certain licensed or certified doctors,
lawyers and teachers have no salary requirement. For certain
computer-related occupations under the professional exemption, they
need not be paid a salary if they are paid on an hourly basis at a rate
not less than $27.63 per hour).

Section 13(a)(1) of the FLSA provides an exemption from both minimum wage and overtime pay for employees employed as bona fide executive, administrative, professional and outside sales employees.  Section 13(a)(1) and Section 13(a)(17) also exempt certain computer employees.  To qualify for exemption, employees generally must meet certain tests regarding their job duties and be paid on a salary basis at not less than $455 per week.  Job titles do not determine exempt status.  In order for an exemption to apply, an employee's specific job duties and salary must meet all the requirements of the Department's regulations.

Area of Application
Time and Labor
Workforce Management

Related Terms
Non Exempt Employees