Exempt Employee Requirements: Salary, Duties, and Safe Harbor

To classify a worker as exempt from overtime under the Fair Labor Standards Act, an employer has to satisfy three separate exempt employee requirements: a minimum salary, payment on a salary basis, and a duties test that fits one of the recognized exemption categories. Miss any one of the three and the employee is non-exempt, which means overtime at one and a half times the regular rate for every hour past 40 in a workweek.¹ The current federal salary floor for most white-collar exemptions is $684 per week, or $35,568 per year.²

Test One: The Salary Threshold

For the executive, administrative, and professional exemptions, the employee must earn at least $684 per week, or $35,568 a year.² A dollar short and the employer owes overtime, regardless of what the job title says or how much responsibility comes with the role.

This number often surprises people. A 2024 Department of Labor rule tried to raise the floor in two stages, first to $844 per week and then to $1,128. A federal district court in Texas vacated that rule in November 2024, and the threshold reverted to the 2019 level.² The eCFR still displays the higher vacated numbers, which is a common source of confusion, but the Department of Labor is enforcing $684 per week.

The full amount must be paid in cash. Board, lodging, and other non-cash benefits do not count toward the threshold. Employers in Puerto Rico, Guam, the Northern Mariana Islands, and the U.S. Virgin Islands apply a $455 weekly floor, and American Samoa uses $380.³

State law can push the number higher, and where it does, the employer follows the higher rule. In 2026, Washington requires roughly $80,168, California about $70,304, and New York $66,300 for employers in New York City, Long Island, and Westchester County. Colorado and Alaska also set thresholds well above the federal figure. Check your state before relying on $684.

Test Two: The Salary Basis Requirement

Meeting the dollar figure is only part of the compensation test. The employee has to be paid on a “salary basis,” meaning a fixed, predetermined amount each pay period that does not fluctuate with hours worked or quality of performance.⁴ If a salaried employee performs any work during a week, they generally get the full weekly salary. An employer who routinely docks an exempt worker’s paycheck for leaving early is treating that person as hourly, and can lose the exemption entirely.

When Deductions Are Allowed

Federal regulations permit deductions from an exempt employee’s salary in a limited set of situations:⁴

Full-day personal absences unrelated to sickness. Partial days cannot be deducted.
Full-day sickness or disability absences, but only if the employer has a paid-leave plan and the employee either has not yet qualified for it or has used it up.
Unpaid disciplinary suspensions of one or more full days for serious workplace conduct violations, imposed under a written policy that applies to all employees.
Penalties for breaking safety rules of major significance.
Hours taken as intermittent or reduced-schedule leave under the Family and Medical Leave Act, including partial days.⁵
The first and last week of employment, when the employer may pay only for days actually worked.

Jury duty pay, witness fees, and military pay can be offset against the weekly salary for the weeks the employee receives them, but the offset alone cannot pull the salary below the minimum.⁴

The Safe Harbor

A single improper deduction does not automatically destroy the exemption. If the employer has a written policy prohibiting improper deductions, gives employees a way to complain, reimburses affected workers, and commits to future compliance, the exemption survives.⁶ The strongest evidence of that policy is a written document distributed at hire or included in the employee handbook. Even without a formal policy, isolated or accidental deductions do not kill the exemption if the employer reimburses the worker. The safe harbor disappears once the employer keeps making the same improper deductions after complaints.

Test Three: The Duties Test

Compensation is not enough on its own. What the employee actually does day to day has to fit one of the recognized exemption categories. Each category runs on the concept of “primary duty,” meaning the principal or most important function the person performs.⁷ Spending more than half your time on exempt work usually satisfies this, but time is not the only factor. The analysis also weighs the relative importance of the exempt duties, the amount of supervision the employee works under, and the gap between the employee’s pay and what non-exempt coworkers earn for similar tasks. A store manager who spends 60 percent of the day stocking shelves may still qualify if management is the most important part of the role and the manager exercises genuine authority.

Executive

The executive exemption covers employees whose primary duty is managing the business or a recognized department. The employee must regularly direct the work of at least two full-time employees or the equivalent, and must have real authority over hiring and firing, or at least make recommendations that carry serious weight.⁸ The two-employee requirement counts full-time equivalents, not headcount.⁹ A “manager” title on a business card means nothing on its own; what matters is whether the person actually controls staffing and directs how the work gets done.

Administrative

The administrative exemption is the one employers misapply most often. It covers office or non-manual work directly related to the management or general business operations of the employer or its customers, such as finance, human resources, marketing, or compliance.¹⁰ The primary duty must also involve exercising discretion and independent judgment on matters of significance. That means more than making routine choices during the day. The exemption targets people who can commit the employer to a course of action, negotiate on its behalf, or interpret company policy in ways that affect others. If the job can be done by following a manual or script, the exemption almost certainly does not apply.

Professional

The professional exemption has two branches.¹¹ Learned professionals perform work requiring advanced knowledge in a field of science or learning, acquired through a prolonged course of specialized study, typically a four-year degree or more in a field like medicine, law, engineering, or accounting. The work must be primarily intellectual and varied enough that it cannot be standardized. A nurse applying clinical judgment to care plans fits the branch; a medical coder entering diagnosis codes does not, even though both work in healthcare.

Creative professionals do work that depends on invention, imagination, or original talent in a recognized artistic field, such as writers, composers, visual artists, and actors. A journalist who investigates and writes original analysis fits more easily than one who mainly reformats press releases.

Doctors, lawyers, and teachers get special treatment. Licensed attorneys and physicians actively practicing their profession are exempt from overtime regardless of how they are paid; the salary threshold and salary basis rules simply do not apply.¹² This extends to medical residents and interns who hold the required degree, even before full licensure. Elementary and secondary teachers whose primary duty is teaching are similarly exempt from the salary requirements.¹³

Computer Employee

A separate exemption applies to certain workers in computer-related roles whose primary duty involves systems analysis, software design and development, programming, or testing based on user or system design specifications.¹⁴ Someone who merely operates computers or enters data does not qualify. Unlike the other categories, computer employees may be paid hourly, at a minimum rate of $27.63 per hour, or on a salary that meets the standard $684 weekly threshold.¹⁵ Job titles in tech shift constantly, so the analysis rides entirely on what the person does.

Outside Sales

The outside sales exemption applies to employees whose primary duty is making sales or obtaining contracts, and who regularly work away from the employer’s place of business.¹⁶ Selling by phone, email, or internet from a home office does not count unless the remote contacts are merely supplemental to in-person visits. Any fixed location the salesperson uses as a home base, including a home office, counts as the employer’s place of business. Outside sales employees are exempt from both the salary threshold and the salary basis rule and can be paid entirely on commission.

The Highly Compensated Shortcut

Workers earning at least $107,432 per year in total compensation face a simplified duties analysis.¹⁷ Instead of meeting every element of the executive, administrative, or professional duties tests, the employee only has to regularly perform at least one duty from any of those categories. The $107,432 must include at least $684 per week paid on a salary basis, but the rest can come from commissions, bonuses, or other non-discretionary compensation.¹⁸ The vacated 2024 rule had tried to raise this figure to $151,164, but the court order returned it to the 2019 number.

If bonuses and commissions fall short of $107,432 by year end, the employer has a narrow window to fix it. A single catch-up payment can be made during the last pay period of the 52-week measurement period or within one month after it ends, and it counts only toward the year it was meant to cover.¹⁸ Skip the catch-up and the employee was never exempt under this test for that year, though they might still qualify under one of the standard duties tests.

What Getting It Wrong Costs

Misclassification is expensive. An employer who treats a non-exempt worker as exempt owes all the unpaid overtime the employee should have received, plus an equal amount in liquidated damages, which effectively doubles the bill. Employees can also recover attorney’s fees and court costs.¹⁹

The standard filing window is two years from each unpaid paycheck. If the violation was willful, meaning the employer knew or showed reckless disregard for whether the classification was correct, the window stretches to three years.²⁰ The Department of Labor can also impose civil money penalties of up to $2,515 per willful or repeated violation.²¹ Penalties apply per employee, per violation period, so an employer who misclassifies a team of ten workers for two years is looking at exposure that multiplies across every affected paycheck.

1
U.S. Department of Labor. Wages and the Fair Labor Standards Act
2
U.S. Department of Labor. Earnings Thresholds for Executive, Administrative, and Professional Employees
3
eCFR. 29 CFR 541.600 – Amount of Salary Required
4
eCFR. 29 CFR 541.602 – Salary Basis
5
eCFR. 29 CFR 825.206 – Interaction With the FLSA
6
eCFR. 29 CFR 541.603 – Effect of Improper Deductions From Salary
7
eCFR. 29 CFR 541.700 – Primary Duty
8
eCFR. 29 CFR 541.100 – General Rule for Executive Employees
9
eCFR. 29 CFR 541.104 – Two or More Other Employees
10
eCFR. 29 CFR 541.200 – General Rule for Administrative Employees
11
eCFR. 29 CFR 541.300 – General Rule for Professional Employees
12
eCFR. 29 CFR 541.304 – Practice of Law or Medicine
13
eCFR. 29 CFR 541.303 – Teachers
14
eCFR. 29 CFR 541.400 – General Rule for Computer Employees
15
U.S. Department of Labor. Fact Sheet 17E – Exemption for Employees in Computer-Related Occupations Under the FLSA
16
eCFR. 29 CFR 541.500 – General Rule for Outside Sales Employees
17
U.S. Department of Labor. Fact Sheet 17H – Highly Compensated Employees and the Part 541 Exemptions
18
eCFR. 29 CFR 541.601 – Highly Compensated Employees
19
Office of the Law Revision Counsel. 29 USC 216 – Penalties
20
Office of the Law Revision Counsel. 29 USC 255 – Statute of Limitations
21
U.S. Department of Labor. Civil Money Penalty Inflation Adjustments