There are three types of employees that are exempt under federal law: executive, administrative and professional. A big misconception is that paying a "salary" alone makes an employee "exempt." Not true. In addition to payment on a salary basis, there is a “duties test.” For example, an “executive exempt” person’s “primary duties” must consist of the management of the enterprise (or a recognized department or subdivision) and also the customary and regular direction of the work of two or more employees, and the right to hire and fire. If those additional tests are not met, the employee is not “executive exempt.” Both the “administrative” and “professional” exemption each has their own additional “duties” tests.

Improper classification could have serious undesirable effects. These unwanted effects can be hugely magnified in a class action lawsuit.

(Reviewed 9-08)