While “exempt” can have a number of different meanings (especially in the context of public and civil service employees), generally an “exempt” employee is one that is exempt from the minimum wage and/or overtime requirements of the Fair Labor Standards Act and New York Labor Law. Both the FLSA and NYLL exempt certain classes of employees from the requirement that they be paid a minimum wage or overtime when they work more than 40 hours in a week. There is a common misconception that employees are either “hourly” or “salary” and that if you are “hourly” you are entitled to overtime compensation and you are not if you are “salary,” but that is simply not the case (though an employee must be paid on a salary basis to qualify for many of the exemptions); instead, whether an employee falls under an exemption will depend on the nature of their job duties. Below is a list of the exemptions under the FLSA and NYLL; if you do not fall under one of these exemptions, then you may be a non-exempt employee and should be paid overtime.
- Administrative Exemption: To qualify for this exemption, an employee must be paid on a salary basis and their primary duty must both be directly related to the management or general business operations of the company (e.g., finance, accounting, insurance, quality control, human resources, compliance and other similar activities) and involve the exercise of discretion and independent judgment with respect to matters of significance. The administrative exemption is one that many employers tend to overuse because they think more employees fall under this definition than actually do.
- Executive Exemption (oftentimes referred to as the Managerial Exemption): To qualify for this exemption, an employee must be paid on a salary basis and their primary duty must involve managing two or more full-time employees within a specific department or subdivision. To be considered a manager, an employee must have the ability to hire or fire employees (or at least their recommendation must be given considerable weight).
- Learned Professional Exemption: To qualify for this exemption, an employee must be paid on a salary basis and their primary duty must be the performance of work requiring advanced knowledge in the field of science or learning customarily acquired through a prolonged course of study – think law, medicine, accounting, actuarial computation, engineering, architecture, teaching, and pharmacy to name a few.
- Creative Professional Exemption: To qualify for this exemption, an employee must be paid on a salary basis and must perform work that requires “invention, imagination, originality, or talent is a recognized field of artistic or creative endeavor” (e.g., music, writing, acting, graphic arts, journalism, to name a few).
- Highly Compensated Employee Exemption: An employee will qualify for this exemption if they are paid an annual salary of more than $100,000 and perform any of the duties that fall under the administrative, executive or professional exemptions – the difference being that the employee need only perform one of these duties, it doesn’t have to be their primary duty.
- Computer Employee Exemption: To be eligible for this exemption, an employee must be paid on a salary basis and employed as a computer systems analyst, computer programmer, software engineer or other similar position and performs work related to the design, development and application of computer systems and programs.
- Outside Sales Exemption: To qualify for this exemption, an employee’s primary duty must be “making sales” or “obtaining orders for contracts” and must customarily and regularly work outside of the company’s offices. The best example of this type of work is a traveling salesperson; conversely, an employee that only performs a minimal amount of sales – think of a driver that also does sales work – does not qualify for the exemption.
- Commissioned Sales Exemption: Employees that work for a retail or service establishment qualify under this exemption if their regular rate of pay (including commissions) exceeds 1.5 times the minimum wage (or $10.88) and the commissions paid to the employee make up more than half of the total earnings for a given period. This is a relatively easy buden for most retail establishments to meet, so most sales employees will meet the requirements so long as their commissions make up more than 50% of their total earnings.
- Motor Carrier Exemption: Drivers, loaders and mechanics whose duties affect the interstate transportation of people or goods are exempt from the overtime wage laws; however, there is a “small vehicle exception” that may apply to drivers of smaller (i.e., less than 10,000 lbs. or 8 passengers).
- Other Exempt Employees: For a number of other reasons (often political reasons), Congress exempted a number of other classes of workers from the FLSA (and New York largely follows the lead of the federal government with respect to exemptions): farmworkers, seasonal and recreational employees, salesman and mechanics employed by car dealerships, airline employees, occasional babysitters, home health care aids or companions, railroad employees, taxicab drivers. For a more detailed list, review this information from the U.S. Dept. of Labor.
The determination of whether an employee is properly classified as either exempt or non-exempt, can be complicated and requires a detailed review of all the facts and circumstances surrounding the employee’s work for their employer. As a result, if you have additional questions, it is important for you to speak with an attorney. If you would like our assistance in connecting with an attorney, please fill out the form below.