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Exemption for Executive, Administrative, Professional, &
Outside Sales Employees Under the Fair Labor Standards Act (FLSA)
This fact sheet provides general information concerning the
exemption provided by Section 13(a)(1) of the FLSA as defined
by Regulations, 29 CFR Part 541.
Characteristics
Section 13(a)(l) of the FLSA exempts executive, administrative,
professional, and outside sales employees from the minimum wage
and overtime requirements of the FLSA, provided they meet certain
tests regarding job duties and responsibilities and are compensated
"on a salary basis" at not less than stated amounts.
Subject to certain exceptions set forth in the regulations,
in order to be considered "salaried", employees must
receive their full salary for any workweek in which they perform
any work without regard to the number of days or hours worked.
This rule applies to each exemption that has a salary requirement
(outside sales employees, and certain licensed or certified
doctors, lawyers and teachers have no salary requirement. For
certain computer-related occupations under the professional
exemption, they need not be paid a salary if they are paid on
an hourly basis at a rate not less than $27.63 per hour). The
special requirements which apply to each category of employees
are summarized below.
Executive Exemption
Applicable to employees who have management as their primary
duty; who direct the work of two or more full-time employees;
who have the authority to hire and fire or make recommendations
regarding decisions affecting the employment status of others;
who regularly exercise a high degree of independent judgment
in their work; who receive a salary which meets the requirements
of the exemption; and who do not devote more than 20% of their
time to non-management functions (40% in retail and service
establishments).
Administrative Exemption
Applicable to employees who perform office or non-manual work
which is directly related to the management policies or general
business operations of their employer or their employer's customers,
or perform such functions in the administration of an educational
establishment; who regularly exercise discretion and judgment
in their work; who either assist a proprietor or executive,
perform specialized or technical work, or execute special assignments;
who receive a salary which meets the requirements of the exemption;
and who do not devote more than 20% of their time to work other
than that described above (40% in retail and service establishments).
Professional Exemption
Applicable to employees who perform work requiring advanced
knowledge and education, work in an artistic field which is
original and creative, work as a teacher, or work as a computer
system analyst, programmer, software engineer, or similarly
skilled worker in the computer software field; who regularly
exercise discretion and judgment; who perform work which is
intellectual and varied in character, the accomplishment of
which cannot be standardized as to time; who receive a salary
which meets the requirements of the exemption (except doctors,
lawyers, teachers and certain computer occupations); and who
do not devote more than 20% of their time to work other than
that described above.
Outside Sales Exemption
Applicable to employees who engage in making sales or obtaining
orders away from their employer's place of business and who
do not devote more than 20% of the hours worked by non-exempt
employees of the employer to work other than the making of such
sales.
Typical Problems
Some problems and misconceptions which are commonly found in
the application of the Section 13(a)(1) exemptions are:
? Employers without a formal sick leave policy docking salaried,
exempt employees for time missed from work because of sickness.
? Employees not receiving full salary payments each week.
? Employees performing routine production type duties that seem
related to general business operations but which have no bearing
on setting of management policies.
? Employees who hold degrees performing jobs which are not professional
in nature or to which the degree they hold is not applicable.
? Employers confusing acquired job skills with the exercise
of independent judgment and discretion.
? Employees placed on salary and classified as exempt without
regard to duties or percentage of time spent in exempt duties.
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