Understanding the Six Exemption Categories

To properly classify your employees, you need to understand the six main exemption categories established by the Department of Labor. Remember, job titles alone don’t determine exemption status—the actual duties performed are what matter.

1. Executive Exemption

For a position to qualify under the Executive exemption, the employee must:

• Manage the enterprise or a recognized department/subdivision
• Regularly direct the work of at least two full-time employees
• Have genuine authority to hire, fire, or make significant employment decisions
• Be paid on a salary basis at or above the threshold amount

Your “Operations Manager” who doesn’t actually manage any staff? Not exempt under this category.

2. Administrative Exemption

This is perhaps the most misunderstood exemption. Administrative exempt employees must:

• Perform office or non-manual work directly related to management or general business operations
• Exercise independent judgment and discretion on significant matters
• Be paid on a salary basis at or above the threshold amount

This isn’t for administrative assistants or office managers who follow established procedures—it’s for employees who make significant independent decisions about how the business operates.

3. Professional Exemption

Professional exempt employees must:

• Perform work requiring advanced knowledge in a field of science or learning
• Have knowledge typically acquired through prolonged, specialized education
• Exercise discretion and judgment in their work
• Be paid on a salary basis at or above the threshold amount

This typically includes positions requiring specialized degrees or certifications, such as accountants, engineers, or attorneys.

4. Computer Professional Exemption

Computer professionals may qualify for exemption if they:

• Work as computer systems analysts, programmers, software engineers, or similar roles
• Perform specific duties related to systems analysis, program development, or systems design
• Are paid either on a salary basis at or above the threshold amount or at a specified hourly rate

Your IT support staff who primarily troubleshoot hardware issues typically won’t qualify.

5. Outside Sales Exemption

The Outside Sales exemption applies to employees who:

• Have a primary duty of making sales or obtaining orders/contracts
• Regularly work away from the employer’s place of business

Importantly, this is the only exemption that doesn’t require meeting a minimum salary threshold.

6. Highly Compensated Employee Exemption

At the federal level, employees who:

• Earn at least $107,432 annually
• Perform at least one duty of an exempt executive, administrative, or professional employee
• Regularly perform office or non-manual work

May qualify for this exemption, though many states (including California) don’t recognize this category.

And speaking of states – these are the federal requirements.  Be sure to check the rules in your state – they may be significantly different.

The Salary Basis Requirement

Beyond job duties, most exempt employees must be paid on a salary basis at or above specific thresholds:

• Federal level: Currently $684 per week ($35,568 annually)
• State level: Many states set higher thresholds (California requires twice the state minimum wage for a full-time employee)

This salary must generally be guaranteed regardless of the quantity or quality of work performed, with limited exceptions for full-day absences.