The Fair Labor Standards Act of 1938 (FLSA) promulgates the regulations concerning exempt and nonexempt employees. Exempt employees in certain categories and positions must qualify for exemption using a test that first considers a minimum salary. The minimum salary for administrative, executive and professional employees is $455 per week as of 2011. There are exceptions to the exempt-status test for employees with ownership in the company and for workers in computer-related jobs.
In addition to regulations concerning minimum wage, work hours and overtime, the FLSA codifies rules that govern employee classification and exempt status. Exempt employees are not entitled to overtime pay; nonexempt workers are entitled to overtime wages for working over 40 hours in a workweek. Several states also have laws modeled after the FLSA. California is one such state that mandates overtime wages when an employee works more than eight hours in one day. Employee classification is subject to a test to determine whether employees are considered exempt workers under administrative, executive or professional guidelines. There are also tests for workers in creative positions as well as exempt classification tests for computer employees. Each test has a minimum wage or salary threshold as the first step to determine exempt classification.
For an employee to be considered exempt from overtime wages under the administrative exemption, the work she performs must be nonmanual and she must exercise independent judgment in the regular performance of her job duties. When the U.S. Department of Labor refers to regular performance of duties or routine job duties, it means the employee's job duties for that test must comprise more than 50 percent of her tasks. In other words, employees classified as exempt workers under the administrative exemption must exercise independent judgment and engage in nonmanual work at least 50 percent of the time.
Workers considered under the executive exemption are required to perform nonmanual tasks, use independent judgment and management skills. They also must routinely manage the job activities of at least two full-time employees. The FLSA allows executives to qualify under this exemption if they direct the work of the equivalent of two full-time workers, which can be interpreted to mean a staff of four part-time workers under the direction of a manager or executive will meet the test for the executive exemption.
The professional exemption covers workers in the teaching profession, as well as those in areas where their jobs require advanced study and credentials. Scientists, high school teachers, college professors, librarians and other similar jobs would likely be considered exempt by these standards, provided they meet the minimum wage threshold.
Employees in computer-related jobs and employees who hold at least 20 percent ownership in a company are the exception to workers who must meet the minimum wage test. Workers in computer-related positions must earn at least $27.63 per hour to be considered exempt under the FLSA. Typically, these jobs include network administrators, software analysts and other jobs that require a significant level of expertise. Employees who own more than 20 percent of the company are excepted from the minimum salary test altogether. For example, an employee who owns 50 percent of the company doesn't have to receive a wage at all to be considered exempt.