A salaried employee may become an exempt employee if they meet a specific criteria. An exempt employee is free from the minimum wage, expected hours, and overtime pay regulations outlined in the Fair Labor Standards Act (FLSA).

An exempt employee’s take-home pay – whether received weekly, biweekly, or monthly – is based on their set annual salary and does not change based on the number of hours they work. This means that exempt employees may work as much or as little as they need to fulfill the duties of their job role, while receiving the same amount of pay.

What is FLSA?

The Fair Labor Standards Act (FLSA) is a crucial component of U.S. employment law, governing wage practices and working conditions. Enforced by the Department of Labor (DOL), private employers and government entities of all sizes and industries must remain compliant with the FLSA.

The FLSA initially established basic employment standards, such as minimum wage rates, overtime eligibility and pay, and youth labor regulations. However, it later expanded to make accurate employee classification (in this case, exempt employees) more important.

In addition to the FLSA, many states also have their own set of employment laws that employers must abide by.

What Classifies As An Exempt Employee?

Here are some of the most important considerations when determining whether an employee’s FLSA status is classified as exempt:

Salary level

Employees must be on a salary and earn more than $1,128 a week or $58,656 a year to be considered exempt. Exempt employees are guaranteed the same income each pay period, regardless of how many hours they worked during that time.

Employment contract

The exempt status only applies to employees working for an employer, not independent contractors, self-employed individuals, or volunteers.

Job duties

The job duties of an employee are a key factor that determines whether they are classified as exempt by the FLSA. The act recognizes three main categories of exempt workers, which can work across any industry. These include: 

  • Executive: To meet the executive exemption status, job duties include having the authority to hire and fire, being the regular supervisor for two or more other full-time employees, and managing (or being “in charge” of) a unit or subunit of the organization.
  • Professional: To meet the professional exemption status, the employee must have specialized knowledge relevant to their field of expertise, typically gained through advanced education.
  • Administrative: To meet the administrative exemption status, job duties include non-manual or office work that supports the overall business operations. This is the most confusing of the exempt job classifications, as most secretaries perform work that is considered administrative, but their jobs aren’t usually exempt. 

The common factor in these three categories is that the exempt employee performs relatively high-level work and is required to exercise their independent judgment and discretion. The job duties, not the job title, determine the exempt status of a position.

Exempt vs Non-Exempt Employees

Non-exempt employees are covered under FLSA regulations, which means they are eligible to receive overtime compensation when they work longer than their contracted hours. However, overall, a non-exempt employee generally receives a lower compensation package, as these positions often don’t require extensive experience or advanced education.

While exempt employees don’t receive overtime pay, their salaries are usually higher and they have more control over their working hours. This means they often choose to only work on certain days of the week to improve their work-life balance.