Definition
An employee who is exempt from the Fair Labor Standards Act's overtime and minimum wage provisions, typically because they meet specific salary and job duties tests for executive, administrative, professional, computer, or outside sales roles.
US Context
The DOL updated the exempt salary threshold in 2024, increasing it significantly. Employers must verify that all exempt employees meet the current threshold. Some states, including California and New York, set higher salary thresholds than the federal standard. California also uses a stricter duties test requiring that exempt employees spend more than 50% of their time on exempt duties. Multi-state employers must apply the highest applicable threshold for each employee's work location.
Best Practices
- Audit all exempt classifications annually against current federal and state salary thresholds and duties tests
- Base exemption decisions on actual job duties performed, not job titles or descriptions
- Document the analysis supporting each exempt classification in case of DOL audit or employee challenge
- Apply the stricter of federal or state requirements for employees in states with higher thresholds like California or New York
Frequently Asked Questions
What is the salary threshold for exempt employees?
The federal salary threshold is updated periodically by the DOL and was significantly increased in 2024. Some states set higher thresholds — California requires exempt employees to earn at least twice the state minimum wage for a 40-hour week. Always apply the higher of federal or state thresholds.
Can a salaried employee be non-exempt?
Yes. Being paid a salary does not automatically make an employee exempt. The employee must also meet the minimum salary threshold and the specific duties test for their exemption category. Salaried non-exempt employees are entitled to overtime pay.
What happens if an exempt employee is misclassified?
The employer may owe back overtime pay for all hours worked over 40 per week, potentially for up to three years (for willful violations). The employer may also owe liquidated damages equal to the back pay amount, plus attorneys' fees and court costs.