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Determining Who's Exempt

To avoid costly lawsuits, it is imperative that businesses understand what "exempt" truly means.

September 30, 2001
Related Topics: Wages and Hours
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o avoid costly lawsuits, it is imperative that businesses understand what "exempt" truly means. Section 13(a)(l) of the FLSA exempts executive, administrative, professional, and outside sales employees from the FLSA's overtime requirements -- as long as they meet certain tests regarding job duties. Here are the categories and their requirements, according to the Department of Labor:

Executive Exemption
These employees have management as their primary duty.

  • They direct the work of two or more full-time employees.

  • They have the authority to hire and fire, or to make recommendations affecting the employment of others.

  • They regularly exercise a high degree of independent judgment in their work.

  • They receive a salary that meets the requirements of the exemption.

  • They do not devote more than 20 percent of their time to non-management functions (or 40 percent in retail and service establishments).

Administrative Exemption
These employees perform office or non-manual work that is directly related to the management policies or general business operations of their employer or customers, or perform such functions in the administration of an educational establishment.

  • They regularly exercise discretion and judgment in their work.

  • They either assist a proprietor or executive, perform specialized or technical work, or execute special assignments.

  • They receive a salary that meets the requirements of the exemption.

  • They do not devote more than 20 percent of their time to work other than that described above (or 40 percent in retail and service establishments).

Professional Exemption
These employees perform work requiring advanced knowledge and education, work in an artistic field that is original and creative, work as a teacher, or work as a computer system analyst, programmer, software engineer, or similarly skilled person in the computer software field.

  • They regularly exercise discretion and judgment.

  • They perform work that is intellectual and varied in nature, and cannot be standardized as to time.

  • They receive a salary that meets the requirements of the exemption (except doctors, lawyers, teachers, and certain computer occupations).

  • They do not devote more than 20 percent of their time to work other than that described above.

Outside Sales Exemption
These employees engage in making sales or obtaining orders away from their employer's place of business. They don't devote more than 20 percent of the hours worked by non-exempt employees of the employer to work other than the making of such sales.

Workforce, October 2001, p. 38 -- Subscribe Now!

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