Exempt and non-exempt: the three tests
Exempt means the employer does not owe overtime or the minimum wage. The FLSA sets out specific exemptions, and a worker claiming one has to satisfy all three tests: how they are paid, how much, and what they actually do.
Test one: salary basis
The employee must be paid a predetermined amount that does not vary with the quantity or quality of work. Docking pay for a half day of missed work breaches the salary basis, though partial-week absences and full-day personal absences may be docked. Deductions can be taken for full-day disciplinary suspensions.
Test two: salary level
The salary must meet a weekly threshold, currently $684 a week, $35,568 a year. Teachers, doctors, lawyers and outside sales staff are exempt regardless of the salary test, and computer employees have slightly different routes. See the separate page on the threshold for how that number got where it is.
Test three: duties
This is where cases are won and lost.
- Executive. Primary duty is managing the enterprise or a recognised department, regularly directing two or more full-time equivalents, and having real authority on hiring and firing or its recommendations carry weight.
- Administrative. Primary duty is office or non-manual work directly related to management or business operations, exercising discretion on matters of significance. Discretion is the battleground; a clerk applying fixed rules is often not exempt.
- Professional. Work requiring advanced knowledge in a field of science or learning, predominantly intellectual, with consistent discretion, or creative work in a recognised field.
Why the title misleads
A shift supervisor who spends most of the day on the till, counts a till at night and cannot hire anyone fails the duties test for the executive exemption, whatever the badge says. If the primary duty is manual rather than managerial, the exemption is gone and every hour over 40 is owed.
Rarely used short cuts
The Motor Carrier Act exemption for drivers, and the commissioned retail sales exemption for staff on a fixed-rate salary of one and a half times the minimum wage with commissions over half of total pay, both exist and both are narrower than they are often claimed to be.