DEFINITION of 'Exempt Employee'

The term “Exempt Employee” refers to a category of employees set out in the Fair Labor Standards Act (FLSA). The category is used to classify which employees are exempt from overtime pay and minimum wage. Exempt employees are paid, not for the hours worked but, rather, for the work performed. To be considered exempt, an employee must use discretion and independent judgment at least 50% of the time and must earn more than $455/week. Individual states may have additional requirements.

BREAKING DOWN 'Exempt Employee'

More specific requirements to be classified as an exempt employee include:

  • Administrative employees exercise independent judgment more than 50% of their working time and are supervised in a very general sense.
  • Executive employees supervise at least 2 employees and make decisions regarding the hiring and firing of said employees.
  • Professional employees are either creative professionals or employees who have an advanced degree that is required for the job.
  • Computer employees who earn more than $27.63/hr
  • Outside sales representatives who typically work outside of their employer’s office

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