What is an Exempt Employee? What Does Exempt Mean?

Exempt Employees Defined
Exempt Employees Defined. Dan Dalton/Getty Images

What is an Exempt Employee? What is the Employee Exempt From?

An exempt employee is considered to be exempt from overtime pay.  

The category of exempt employees was set up by the Department of Labor (DOL) to recognize that certain types of work aren't able to be performed by the hour. These types of employees are: managerial, supervisory, and professional employees. 

For example, an executive might work at her desk at home on a project, stop to fix lunch and take the dog to the vet, and come back and take phone calls from work and continue on the project.

She might need to work weekends, and sometimes she might need to travel. 

Exempt employees are said to work to get the job done, not by the hour. 


While "exempt" originally meant "exempt from overtime," more and more exempt employees are eligible to receive overtime. If an exempt employee's pay is below the minimum set by the Department of Labor, the employee is eligible to receive overtime. How overtime is handled for exempt employees is explained below. 

Classifying Employees as Exempt

The DOL has three tests to determine if an employee must be paid overtime. In order to be be exempt from overtime, an employee must:

  • Be paid a salary
  • Be in a "white collar" position (managerial, professional, or supervisory)
  • Be paid at least the minimum weekly rate (discussed below). 

Salary and Exempt Status

Exempt employees are  paid on a salaried basis. That is, they receive an annual salary, distributed among the number of pay periods in a year.

An exempt employee receives the same salary every pay period; the salary is not reduced for fewer hours, performance, days off set by the employer, In other words, if the employee is able to work, he or she must be paid, even if there is no work to do.The DOL is clear: 

Just because an employee is paid a salary, that does not mean they can be classified as exempt. How you as an employer pay someone is not enough to make that employee exempt. 

All exempt employees are salaried, but not all salaried employees are exempt.

It's important to know that most employees are non-exempt; that is, they are not exempt from overtime and must receive overtime pay. The federal government assumes that an employee is non-exempt unless you can provide proof otherwise. 

Type of Work and Exempt Status

Exempt employees have specific types of job duties. The Fair Labor Standards Act (FLSA) recognizes executive, administrative, professional, outside sales, and some computer employees as exempt. Exempt classification is on a case-by-case basis and is not based on the job title of the employee. Just calling someone a "Manager" does not make him or her exempt.

There are very specific criteria for each type of exempt job classification. These "white collar exemptions" are for "bona fide" executive, administrative, and professional employees, along with certain computer professionals and outside sales employees, in this category. These job descriptions must be met in addition to the requirements for minimum salary.


An  administrative employee must do office work directly related to the management or general business operations of the employer or the employer's customers, and, the position must include the exercise of discretion and independent judgment about significant business matters. 

A professional employee must be doing work that requires advanced knowledge, which is intellectual, and it must be in a field of science or learning, acquired by "a prolonged course of specialized intellectual instruction" (that is, not just college education, but an advanced degree).

A creative professional's primary duty must be work requiring invention, imagination, originality or talent in a recognized field of artistic or creative endeavor. 

A computer employee must be employed as a computer systems analyst, computer programmer, software engineer or other similarly skilled worker in the computer field with specific defined duties. 

An outside sales employee must be primarily engaged in making sales, obtaining orders, or making contracts, and must work primarily away from the company's location.

These descriptions are summarized here. You can read more about the specific descriptions of these employees in this Department of Labor Q&A Sheet. 

Minimum Salary and Overtime 

Exempt employees must receive a minimum salary, set by the FLSA. If the employee's weekly salary is below the minimum, that employee must receive overtime for work over 40 hours a week.

Before December 1, 2016, the minimum salary to be exempt from overtime has been the equivalent of $455 an hour, based on 2080 hours (a standard work year (40 hours a week 52 weeks a year). That's  $23,660 annually.

Effective December 1, 2016, the minimum rate increases to $913 a week ($47,476). 

The minimum weekly salary means that an exempt employee who is paid less than the minimum is eligible for overtime and 1 1/2 times weekly pay for work over 40 hours a week. 

Find out more about paying overtime to exempt and non-exempt employees.  


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