What is an exempt employee?

An exempt employee is a worker classified as exempt from overtime pay requirements under the Fair Labor Standards Act, typically because they meet salary and duties tests for executive, administrative, professional, or other exempt categories. For professional service firms, proper exempt classification determines overtime obligations.

Key characteristics

• Not entitled to overtime

• Must meet salary threshold

• Must meet the duties test

• Paid on a salary basis

• FLSA classification

• Misclassification carries penalties

Why it matters for professional service firms

Misclassifying employees as exempt when they should be non-exempt creates liability for unpaid overtime. The tests are specific and must be met. Professional service firms should carefully evaluate each position against FLSA criteria before classifying it as exempt.

Real-world example

Patricia classified all consultants as exempt professionals. DOL audit examined: salary ($75,000 each, exceeds threshold), duties (require advanced knowledge, exercise discretion), and salary basis (paid fixed salary regardless of hours). All met the professional exemption. One admin classified the exempt failed duties test as non-exempt with overtime eligibility.