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Exempt employee

Exempt workers are categorized as any employees who do not qualify for overtime pay or minimum wage as defined by the Federal Labor Standards Act (FLSA). While federal laws stipulate that most hourly employees must be paid time-and-a-half any time they work more than 40 hours per week, there are exceptions for some employees to be paid based on work performed rather than hours worked. Exempt status generally applies to salaried employees who are not subject to time-tracking and earn a minimum salary of $684 per week. (Prior to January 2020 the threshold was $455 per week.)

Specific examples of  employees classified as exempt include:

Administrative exemption - According to the U.S. Department of Labor, to qualify as an administrative employee, a worker’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.” Administrative workers’ roles must also involve “the exercise of discretion and independent judgment with respect to matters of significance.”

Executive exemption - The Department of Labor defines an executive as an employee whose primary duty involves managing an enterprise, department, or subdivision; who directs the work of at least two full-time employees; and who has some authority over the hiring, firing, or advancement of other employees.

Professional exemption - An employee is considered to be an exempt learned professional if they work in a science- or learning-oriented field role in a role that requires advanced knowledge and education.

Computer employee exemption - The computer employee exemption applies to professionals whose roles require advanced knowledge and skill in areas such as systems analysis, programming, development, design, testing, or modification of computer systems and operating systems.

Outside sales exemption - An employee whose primary duties involve making sales, selling services, or procuring contracts away from their employer’s primary place of business may qualify for the outside sales exemption.

It is important to classify employees properly when dealing with exemptions. An employee classified as an independent contractor is non-exempt, and misclassifying such employees can be a serious violation of local, state, and federal labor law. Also be aware that an employee’s job title does not convey exempt status — for example, an employee identified as an Executive Vice President who earns less than $684 per 40 working hours would not be exempt.

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