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What Is an Exempt Employee?

An exempt employee is someone who is not entitled to overtime pay regardless of hours worked and is paid a fixed salary, typically performing executive, administrative, or professional work with a significant level of discretion and independent judgment, and must meet specific criteria set out by the Fair Labor Standards Act (FLSA).

The Department of Labor (DOL) provides an extensive list of rules and regulations for what qualifies as an exempt position. If an employee is paid a high enough amount per week and handles key responsibilities, they may fall under the exempt umbrella. The amount an employee must be paid each week Is $684 or $35,568 annually. The DOL considers executive, qualifying administrative work, and specialty positions such as accounting and engineering as roles that can be labeled as exempt. Additionally, the employee should be able to perform most of their work with a great degree of discretion and autonomy. It is essential to run through all of these factors when deciding the status of an employee.

While it might seem appealing to lump everyone as exempt to avoid tracking hours and overtime, take caution. Misclassifying employees could lead to hefty fines and back pay for missed overtime.

Once employees are set up correctly, companies can create separate policies that support exempt and non-exempt employees. Exempt employees will most likely not be tracking time and attendance. They could also have different requirements for requesting vacation time. For example, an exempt employee might need to request a half-day block, whereas a non-exempt employee that is hourly can request the exact number of hours away from the office. This is one of the rare cases where there can be separate policies for different people in the organization.

If you are unsure if employees are misclassified, the best practice is to do a full audit and set yourself up for success.

What is an exempt employee


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