Exempt vs. Nonexempt Employees

Nonexempt employees must be paid for each hour of overtime that they work, while exempt employees are exempt from overtime regulations and minimum wage laws in terms of the Fair Labor Standards Act.

An exempt employee is not subject to overtime and minimum wage rules set by the FLSA. Exempt employees can legally work for less than the federal minimum wage or work more than 40 hours per week without overtime compensation.

For an employee to qualify as exempt they must be paid at least $684.00 per week ($35,568 per year), be paid on a salary basis, and perform exempt job duties including administrative, computer, executive, professional, creative, or outside sales duties.

To qualify for the administrative exemption, employees must earn at least $684.00 weekly. Their primary duty must be non-manual office work directly related to management or general business operations for the employer or customers. The employee must use independent judgment for significant decisions.

To qualify for the computer employee exemption, employees must be on a salary or fee basis of at least $684.00 per week. They must work as a computer systems analyst, computer programmer, software engineer, or similarly skilled worker.

Work for exempt computer employees must include:

• Application of systems analysis techniques and procedures.
• The analysis, creation, design, development, documentation, testing, or modification of computer systems or programs based on and related to user or system design specifications.
• The creation, design, documentation, testing, or modification of computer programs related to operating systems.
• A combination of the above duties, requiring the same skill level.

To qualify for the executive exemption, employees must earn a salary of at least $684.00 weekly. Their primary duty must be managing the organization or a recognized department. They must direct 2 or more full-time employees, with the ability to hire, fire, and make decisions on employee status.

Employees who qualify for the learned professional exemption must be on a salary or fee basis of at least $684.00 weekly. Their primary duty must require advanced knowledge in their field acquired by extensive education and be mostly intellectual in nature. They must exercise discretion and judgment.

The creative professional exemption allows employers to not pay overtime if the employee is on a salary or fee basis of at least $684.00 per week, and their primary duty requires invention, imagination, originality, or talent in a recognized artistic or creative field.

To be considered for the outside sales exemption, an employee’s primary duty must be sales as defined in the FLSA, or getting contracts or orders for services or for the use of facilities. The employee must normally and regularly work away from the employer’s business locations.

An exempt highly compensated employee must perform office or non-manual work and be paid annual compensation of $107,432 or more with a $684.00 per weekly salary or fee. They must normally and regularly perform at least one of the duties of the exempt administrative, executive, or professional.

Yes. Exempt status means that employers are exempt from having to pay overtime to the employee. It does not mean that the employee is exempt from taxes in any way.

While salaried employees are most frequently in the exempt category, which means employers don't need to pay overtime, they are not always in it. The FLSA has specific definitions for what types of employees can and cannot receive exempt status.

This means an employer pays a salary but does not have to pay minimum wage or time and a half if the employee works more than 40 hours per week.