Exempt vs. Non-Exempt Employee
Under FLSA, the classification distinguishing employees entitled to overtime and full wage-and-hour protections (non-exempt) from those excluded from one or more such protections (exempt). Misclassification of non-exempt employees as exempt is the most frequent FLSA violation.
Under the Fair Labor Standards Act, employees are classified as either "exempt" or "non-exempt" from minimum wage, overtime, or both. Non-exempt employees are entitled to FLSA's full wage-and-hour protections, including overtime at 1.5x for hours over 40 per week. Exempt employees are excluded from one or more FLSA protections.
The principal "white-collar" exemptions (29 C.F.R. Part 541)
Each requires both a duties test and a salary test:
Executive exemption: primary duty is management of the enterprise or a department; customarily directs the work of two or more full-time employees; has authority to hire/fire (or significant input).
Administrative exemption: primary duty is office/non-manual work directly related to management or general business operations; primary duty includes exercise of discretion and independent judgment on significant matters.
Professional exemption: primary duty requires advanced knowledge in a field of science or learning, customarily acquired by prolonged specialized intellectual instruction (learned professional), or invention/imagination/originality/talent in a recognized creative field (creative professional).
Salary basis test
Most exemptions require payment on a "salary basis" of at least $684 per week ($35,568 annually), fixed, predetermined compensation not subject to reduction based on quality or quantity of work. Improper deductions can defeat the exemption.
Other exemptions
Outside sales (no salary requirement); highly compensated employees (HCE, $107,432 annually with relaxed duties test); computer professionals (specific salary or hourly rate); commissioned retail employees under § 207(i).
Employer misclassification of non-exempt employees as exempt is the most frequent FLSA violation. Common errors: (1) classifying based on title rather than actual duties; (2) classifying based on salary alone without examining duties; (3) failing the salary-basis test through improper docking of pay for partial-day absences. The Department of Labor periodically revises salary thresholds; the current $684/week was set in 2020.
Companion article: Wage and Hour Compliance in Texas
Practice guide: Employment Law Basics for Texas Employers