Administrative Human Resources Fundamentals

with Catherine Mattice

Classifying Employees as Exempt or Nonexempt

Exempt or nonexempt status is determined by an employee’s primary job duties, not by how the employee’s
payroll is calculated. In other words, if an employee is salaried, it does not mean the employee is exempt
from receiving overtime pay.

DEFINITIONS
Exempt employees are excluded from minimum wage and overtime requirements.

Nonexempt employees are not excluded from minimum wage pay requirements and are entitled to
overtime pay.

REQUIREMENTS
To be classified as exempt, an employee must:
• Be paid a minimum salary of $456 per week, or $23,660 per year, per the Fair Labor Standards Act
(FLSA), but your state’s law may be different, and you should follow the higher of the two
• Be paid on a salary basis
• Regularly engage in primary job duties that are considered exempt duties

“Primary duty” is the most important duty of the position. If more than 50% of an employee’s time is spent
doing an exempt primary duty, the employee is more likely to be classified as exempt than as nonexempt.

EXEMPTION CATEGORIES
This list is not exhaustive, but includes some of the most common primary duties that might result in an
employee being classified as exempt.

To qualify for an executive exemption:

• The primary duty involves managing the organization itself or a department.
• The employee regularly directs the work of at least two full-time employees.
• The employee regularly has the authority to hire and fire, or the employee’s opinions make a
difference in the hire, fire, and promotion of others.

To qualify for an administrative exemption:

• The primary duty involves performance of nonmanual work directly related to management or general
business of the employer.
• The employee must exercise discretion and independent judgment in “matters of significance.”
• Example: An accountant who reports directly to the CEO is likely exempt.

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To qualify for a learned professional exemption:
• The primary duty of performance requires advanced knowledge and work that includes consistent
exercise of judgment and discretion.
• The advanced knowledge must be acquired by a prolonged course of specialized instruction.
• Example: A person with a master’s degree in child development, working with kids and making
decisions about their well-being, is likely exempt.

To qualify for a creative professional exemption:

• The primary duty includes performing work that requires invention and imagination in a recognized
field.
• Example: A music composer, writer, or actor is likely exempt.

To qualify for a highly compensated employee exemption:

• The primary duty is that of white-collar work, or work that is nonmanual.
• The employee is paid a total of $100,000 or more.

To qualify for a computer employee exemption:

• The primary duty involves application of systems analysis.
• This includes design, development, documentation, creating, and testing of computer systems,
programs, or operating systems.
• Example: A software program designer is exempt; an IT helpdesk worker is nonexempt.

To qualify for outside sales exemption:

• The primary duty involves sales or obtaining contracts for services for which clients will pay.
• This includes regularly working away from the employer’s place of business.
• Example: A software salesperson who travels around attempting to earn contracts with clients is
exempt; a nonprofit fundraiser or customer service representative who upsells products on the
phone is nonexempt.

Disclaimer: This document is for educational purposes only and should serve only as one of many
resources to correctly classify employees. It is your responsibility to ensure you are in compliance with all
federal and state laws. Exempt and nonexempt status is determined by the Fair Labor Standards Act and
your state laws. After classifying your employees, be sure to have an employment law attorney review your
job descriptions and classifications to ensure you are in compliance.

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