The Fair Labor Standards Act sets pay requirements for most types of U.S. employees. Under the FLSA, workers must receive at least federal minimum wage for regular work hours and overtime pay when hours exceed 40 per week.
However, certain types of employees may be exempt from FLSA pay requirements if they receive a certain minimum salary or fee-based pay.
1. Administrative employees
Administrative employees may be exempt under FLSA if their primary duties:
- Involve using their own judgment to make important decisions on behalf of the company
- Include the performance of non-manual or office work related to managing operations on behalf of the business or its clients
2. Outside sales employees
FLSA pay requirements may not apply to workers who are primarily engaged in sales and who largely perform their work outside of their employer’s place(s) of business. Exempt sales work may include duties involving the exchange of tangible property, tangible evidence of intangible property or the use of services or facilities.
3. Executive employees
At the executive level worker pay may be exempt if the employee is primarily responsible for managing the business or a major department or subdivision of the business. Exempt executives must also have regular and direct control over a certain minimum number of employees and have significant authority or influence over hiring, firing and promotion decisions.
Employers may also be able to claim a pay exemption for certain computer professionals or employees in learned or creative professions. However, misclassification of exempt workers is one of the most common reasons that employers face lawsuits under the FLSA. Businesses would do well to ensure that their compensation practices do not open them up to liabilities under current employment law.