Exempt Employee Defined

To be considered “exempt” an employee must meet the following three conditions:

1. The Salary Basis Test

The employee must be paid a set sum of money for each week or shorter time period regardless of whether the employee worked fewer-than-expected hours or performed a less-than-desired quality of work. The salary basis test has several exceptions that allow an employer to pay an employee a lesser sum of money including full-day absences due to personal reason such as illness.

2. The Salary Test

To meet the salary test, the employee must be paid a minimum of $23,660 annually.

3. The Duties Test

The following three classifications of employees qualify for exemption for overtime payments under the duties test: executive, administrative, and professional.

  1. Executive employees are those whose primary duties are managing at least two employees and who have hiring and firing authority (or whose recommendation on hire and fire decisions are given substantial weight).
  2. Administrative professional are whose who perform office work related to the management of policies of the business and exercise independent judgement on matters of significance to the business.
  3. Professional employees are those whose duties require advanced types of work in a field of science or learning. The U.S. Department of Labor expressly provides that licensed practical nurses, x-ray technicians, and other similar healthcare employees do not meet the professional employees test and are therefore subject to overtime provisions. However,  registered nurses, physician assistants, and physical therapists are generally considered exempt and accordingly, no overtime wages are due them.