Tests of Exemption
There are three tests to determine whether an employee should be classified as exempt or non-exempt – compensation method, compensation level, and job duties. These three tests are not error-proof, so if any uncertainty exists or questions arise, it is highly recommended to consult the federal Department of Labor website or an individual state’s Wage and Hour website. It is usually a good idea anyways to consult both websites because some states have stricter stipulations regarding exemption classification, which supersede FLSA requirements.
First, to be exempt, an employee must be compensated on a salary, fee, or hourly basis, unless the employee performs outside sales, in which the compensation method is not relevant. Second, an employee must be compensated at least $455 per week (or $27.63 per hour if the employee is a computer software professional). And third, an employee’s primary job responsibilities and duties must be professional and/or managerial in nature or require exercising discretion or judgment in matters of importance.
To assist in the determination process, a document has been developed that provides a decision flowchart to help employers identify what type of exemption, if any, an employee falls under. This document, entitled Exempt or Non-Exempt Flowchart, is available for download in the Entrepreneurship Media Gallery. To use this reference guide, one must start in the upper-left corner and follow the path that best meets the employee’s employment situation.