Exempt employee
A salaried employee who meets the FLSA executive, administrative, professional, computer, or outside-sales test and is not entitled to overtime.
An exempt employee is one who meets the Fair Labor Standards Act's salary basis test and at least one of the duties tests for the executive, administrative, professional, computer, or outside-sales exemption. Exempt employees are not entitled to FLSA overtime pay regardless of how many hours they work in a workweek.
The salary basis test requires the employee to be paid a predetermined fixed amount each pay period, not subject to reduction based on quality or quantity of work, of at least $684 per week ($35,568 per year) as of 2024 — the threshold is scheduled to rise. The duties tests are role-specific and require, in addition to the salary, that the employee perform specified types of work — managing other employees for the executive exemption, exercising discretion and independent judgment for the administrative exemption, and so on.
Misclassifying a non-exempt employee as exempt is the most expensive single payroll mistake a small business can make. The remedy is back overtime plus an equal amount of liquidated damages plus attorney's fees plus state penalties in many jurisdictions; the per-employee exposure can easily exceed $50,000. Run a classification review at least annually, especially after promotions or salary adjustments.